LOOKERS - AT A GLANCE

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LOOKERS - AT A GLANCE Contents

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Chairman’s Review ..............................................02

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Chief Executive’s Review....................................04 Finance Director’s Review ................................10 Profile of Directors ............................................16 Directors’ Report ................................................17 20 04

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Statements on Corporate Governance..........21 Corporate Social Responsibility Review ........25

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Directors’ Remuneration Report ....................26

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Independent Auditors’ Report..........................32 £’000

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Principal Accounting Policies ............................33

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Consolidated Profit and Loss Account ..........34

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Statement of Total Recognised Gains and Losses ..........................34

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Consolidated Balance Sheet ..............................35 Parent Company Balance Sheet........................36

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Consolidated Cash Flow Statement................37 20000

Notes to the Financial Statements ..................38

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Trading Outlets and Interests in Major Subsidiary Companies ............................52

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Five Year Record ..................................................53

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ANNOUNCEMENT

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RESULTS FOR THE FULL YEAR

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21 MARCH 2005

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ANNUAL GENERAL MEETING

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12 MAY 2005

Chairman’s Review 2004 I am pleased to report that the Group has continued to achieve excellent progress during 2004, culminating in further growth of profit, earnings and dividends. FINANCIAL HIGHLIGHTS AND DIVIDEND These results represent a milestone for the business with turnover comfortably breaking through the £1 billion mark for the first time in the Group’s history. Profit before tax for the year was £26.5 million, but, before tax, goodwill amortisation and exceptional items was £15.3 million, representing an increase of 17 per cent on the previous year. Given the Group’s continued strong performance, the Board is recommending a final dividend of 8.1 pence, bringing the total dividend for the year to 12.1 pence, representing a strong financial return for shareholders.

Fred Maguire Chairman 21 March 2005

CORPORATE DEVELOPMENTS Maintaining and expanding relationships with our preferred manufacturer partners remains a key objective of the Group. During the year we acquired a number of dealerships, including the Volkswagen franchise for Northallerton and Darlington, and Saab in Chester. These outlets complement existing operations in the respective regions. Alongside the continuing development of our franchised car retailing business, the Group’s stated strategy is to develop broad revenue streams from all sectors of the automotive industry. With this is mind, and as previously announced at the time of our interim results in August, we entered into the important car parts aftermarket with the acquisition of FPS Distribution. I am pleased to report that this business has been smoothly integrated into the Group and is performing ahead of our expectations. In addition, since the year-end we also announced the acquisition of Bristol Trade Centre, the largest used car supermarket in the South-West of England. This acquisition represents the first step for the Group as it develops a strong stand-alone used car presence in England.

THE FUTURE Looking to the future, industry analysts are forecasting a slight reduction in new car registrations for 2005.Whilst this may be the case, one must not lose sight of the fact that demand for new cars remains healthy and has exceeded 2.4 million units in every year since 2001. We believe we are well placed to prosper this year given our focus on the after-sales market through our ‘Customers for Life’ programmes and the successful addition to the Group of the UK’s leading wholesale distributor of vehicle parts to the distress market, FPS Distribution. After-sales, an increasingly important component of motor retailing, now accounts for over 50% of the Group’s gross profits. Going forward, our strategy for growth involves identifying key expansion opportunities which will improve the quality of our earnings, building on our aftersales capability and significantly strengthening our used car operations.These factors, coupled with an encouraging start to the key month of March, give us confidence that 2005 will bring further success for the Group. I would like to take this opportunity to thank all my colleagues at Lookers for their effort and commitment this year. Together we have achieved another excellent performance that firmly reinforces our position as one of the UK’s leading motor retail groups.

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Chief Executive’s Review 2004 INTRODUCTION AND TRADING ENVIRONMENT

We currently operate over 100 outlets across the UK, representing 22 manufacturers, which is one of the broadest spreads of franchises in the industry. We are equally committed to the volume and premium ends of the market and have a well-balanced geographic coverage that provides us with a degree of protection from regional economic fluctuations. Underpinning all our operations is our focus on after-sales and a culture geared towards gaining business and keeping customers at all stages of a vehicle’s life cycle.

Ken Surgenor Chief Executive 21 March 2005

The new car market in 2004 got off to a strong start with the first quarter seeing the highest ever recorded new car sales in the UK.Whilst there was a decline in sales to private buyers in the second half of the year, offset somewhat by robust fleet and used car sales, the year finished broadly in line with the previous record year. Lookers continued to outperform the market with new car sales for the year up 4 per cent on a like for like basis, and used car sales also up by the same figure. Although industry analysts expect to see a slight reduction in UK registrations in 2005, we believe Lookers’ increased emphasis on developing its used car offering and after-sales capability by the recent acquisitions of FPS Distribution and Bristol Trade Centre underpins our overall franchise growth strategy, holding the business in good stead across our entire franchise dealer network.

LOOKERS VAUXHALL - BIRMINGHAM (new build)

FINANCIALS Turnover for the year increased by 14 per cent to a record level of £1.1 billion, with operating profit before goodwill and exceptionals at £21.5 million, an increase of 20 per cent. Profit before tax including exceptional items was £26.5 million (2003: £14.0 million). Profit before tax, goodwill amortisation and exceptional items was up 17 per cent to £15.3 million (2003: £13.1 million),generating basic earnings per share of 53.6 pence and adjusted earnings per share of 32.3 pence, an increase of 23 per cent.

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LOOKERS VW - BLACKBURN (new build)

LOOKERS VW - DARLINGTON (acquisition)

LOOKERS SAAB - CHESTER (acquisition)

LOOKERS VAUXHALL - SPEKE (refurbishment)

During the year management continued to drive operating efficiencies and cost savings across the business whilst at the same time growing organically and by acquisition. Our operating margin on continuing businesses has improved from 1.9 per cent in 2003 to 2.1 per cent in 2004. Working capital has also been tightly controlled, resulting in a healthy increase in our operating cash flow before non-operating exceptional items for the year from £17 million in 2003 to £43 million.

DIVIDEND Following another excellent performance for the Group and our confidence in the Group’s prospects for this year, the Board is proposing a final dividend of 8.1 pence, bringing the total dividend for the year to 12.1 pence, an increase of 10 per cent on 2003. Subject to final approval at the Annual General Meeting, the final dividend will be paid on 31 May 2005 to shareholders on the register on 8 April 2005.

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Chief Executive’s Review 2004 (continued)

LOOKERS HONDA - DERBY (refurbishment)

As indicated at the interim results, given the disproportionate level of profit earned in the first half of the year, it is the Board’s intention that over a period of time a larger proportion of the dividend will be paid at the interim stage.

ACQUISITIONS AND DISPOSALS In the second half of the year we acquired two Volkswagen outlets in Northallerton and Darlington. We were particularly pleased to expand our relationship with this successful brand and these two outlets complement our existing Volkswagen operation in Middlesbrough,Teesside. In October 2004, we also completed the acquisition of Chester Saab, our second Saab outlet in the North-West. This franchise enjoyed a 39% increase in its market share in 2004 over 2003. The Group is already well established in Chester and the surrounding region with Vauxhall and Renault franchises. Saab has some exciting new products in the pipeline and the introduction of a new diesel engine for the first time for the Saab 9-3 towards the end of 2004 has presented a strong marketing opportunity. All three of the businesses were acquired in the last quarter and incurred a small loss in the period. We will be relocating the Northallerton business to an existing freehold site that is being completely refurbished to the latest VW retail standards. These businesses are all anticipated to contribute positively during 2005. Since the year-end we completed the acquisition of Bristol Trade Centre, a leading used car supermarket for £8.5 million. This move gives Lookers a significant presence in the used car supermarket sector and is in line with the Group’s stated strategy of complementing further its revenue streams in the automotive industry. Bristol Trade Centre is a well established and successful operator, selling over 4000 used cars per year.The acquisition will add around £35 million to the Group’s turnover and should be earnings enhancing from the outset. In order to improve both the quality of our franchise portfolio

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LOOKERS RENAULT - CHESTER (refurbishment)

and our earnings, we made a number of disposals during the course of the year. Nissan continues to be over facilitised in the North-West and we further rationalised our exposure to this business by exiting our operations in Manchester and Macclesfield just after the half-year.Those businesses incurred an operating loss of approximately £0.9 million. We also announced that we have given two years’ notice to exit from all four of our MG Rover outlets. Lookers will continue to work with MG Rover during this transitionary period. Exiting from these dealerships has resulted in an exceptional charge of £2.8 million in the year under review. During 2004 these four dealerships together lost £0.7 million at operating profit level. We are confident that working capital released from exiting all the above outlets can be used to provide better levels of return for the Group.

FPS DISTRIBUTION The Group completed the acquisition of FPS Distribution, the leading wholesale distributor of distress vehicle parts to the UK automotive aftermarket, in August 2004. FPS Distribution has 19 outlets nationwide and over 3,800 independent motor factor customers. The acquisition represents an important step in Lookers’ strategy of broadening the base of its revenue stream from the automotive industry, and I am pleased to report that this business has been fully integrated into the Group and is performing ahead of our expectations. This business has generated over £1.6 million of operating profits in the period of our ownership. We have identified an opportunity to expand the distribution side of this business, whereby we provide overnight fulfilment of customer stock orders on behalf of the original equipment manufacturers. It is our intention to significantly increase the warehouse capacity of our national distribution centre in Sheffield from 55,000 sq ft to approximately 100,000 sq ft, with

LOOKERS VAUXHALL - CHESTER (new build)

further consideration being given to additional depots in strategic locations and to maximise synergies wherever possible throughout the rest of the Group. In addition, through the development of its IT systems, we will significantly improve service by enabling customers to search our stocks and order on-line thus providing the opportunity of enhanced parts stock turn.

OPERATING REVIEW - FRANCHISE DEVELOPMENTS With the acquisition of FPS, a further 19 parts distribution centres have been added and we now operate a network of approximately 120 vehicle, servicing and parts facilities across the UK. In 2004 new vehicle sales accounted for 35 per cent of gross profit (2003: 38 per cent), used car sales for 15 per cent (2003: 15 per cent) and after-sales for 50 per cent (2003: 47 per cent).We would envisage that during the course of this year the used car and after-sales contribution will trend upwards.

NORTHERN IRELAND Charles Hurst, our subsidiary in Northern Ireland continues to dominate in that region. Further expansion is anticipated later in 2005 when we open our third Vauxhall facility for that manufacturer in the Province providing them with a presence in Belfast for the first time in five years. We have taken the opportunity on two occasions during the last twelve months to extend our Boucher Road facility. This now encompasses an impressive 20 acres. This region continues to make an important contribution to the Group’s turnover and profitability.

LOOKERS VW - NORTHALLERTON (acquisition)

marketing and administrative functions. This rationalisation programme was completed in the first half as we opened the UK’s largest Vauxhall Brand Centre on Star Park, South, Birmingham in June 2004. Since opening, this new brand centre has been steadily growing volumes of new and used vehicle sales and also enjoying substantial growth within its after-sales business. We would expect to see the true benefits from this business flow through in the later part of 2005 and beyond. During 2005, as part of the market area, we will open our third facility in Northern Ireland on Boucher Road, Belfast to complement our Lisburn and Portadown operations. Whilst sales, nationally, were marginally down for Vauxhall, Lookers’ like for like volumes increased by 11.3 per cent. We have confidence that 2005 will be another strong year for the brand as it introduces the VXR range and new Astra derivatives.

VOLKSWAGEN In 2003 we were awarded the territory for Blackburn to create an enlarged market area for Blackburn and Burnley. Initially we rented the premises from the previous owner on a short-term lease. In July 2004, we relocated this business to a brand new purposebuilt facility on the outskirts of Blackburn in a prime location.We now serve the entire Blackburn and Burnley market area, and this re-organisation has led to a much improved performance. We will further develop the market area by building a Bodyshop on a site adjacent to our recently completed Blackburn outlet. This will be operational in the second half of 2005.

VAUXHALL

Across the Group, like for like volumes increased by a very commendable 28.0 per cent.

Lookers is one of the largest partners for Vauxhall in the UK and during 2004 our 14 dealerships returned another strong performance. As we indicated at our interim results in August, we rationalised four Vauxhall businesses in Birmingham, centralising fleet, wholesale parts, rental operations and

Volkswagen is a key business partner for Lookers and, following the two aforementioned acquisitions in Northallerton and Darlington in the latter half of 2004, we now operate 5 outlets across the UK.

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Chief Executive’s Review 2004 (continued) PREMIER AUTOMOTIVE GROUP (PAG) PAG has had a particularly strong year. Although the fortunes of the individual brands are somewhat mixed, all of these businesses operate in mature market areas. The Volvo businesses acquired in December 2002 returned a particularly pleasing result for the year under review following rationalisation and integration carried out in 2003. Another strong performance is anticipated in 2005, with Discovery 3 which came out in November 2004, and the allnew Range Rover Sport and new model Range Rover, due in the first half of 2005. These new Land Rover models, together with a strong order book for the recently introduced Aston Martin DB9 and the V8 Vantage expected later in 2005, give us confidence that PAG’s strong performance will continue this year.

RENAULT As we stated at the interim results, in June we opened a new Renault dealership in Newtownards, Co. Down. This showcase development has a 10 car showroom, parking for a further 150 cars on display and extensive workshop and after-sales facilities. This business has performed extremely well in the second half of the year, and along with the redeveloped Renault showroom in Boucher Road, Belfast, our Renault customers have access to the very best facilities and service in an area which we currently dominate. Whilst like for like volumes nationally were broadly flat for the year, Lookers achieved an overall increase of 1.9 per cent. Despite this outperformance, margins and profitability were down on the previous year and a strategy is now in place to return this business to its previous level of performance.

TOYOTA / LEXUS During 2004 we commenced the roll-out of the Toyota retail concept in our depots. Despite the disruption to the business and the increased cost base, we managed to maintain a satisfactory performance from this franchise.

CHARLES HURST RENAULT - NEWTOWNARDS (new build)

In the last quarter of 2003, we acquired our second Lexus franchise in Hadleigh and this achieved a very respectable result in 2004. With the introduction of the new GS300 followed by the Hybrid GXRX 400 and IS250, 2005 should deliver another strong result.

HONDA Lookers once again significantly outperformed the market increasing like for like volume by 22.9 per cent (market: 11.5 per cent). During the course of the year we carried out a major refurbishment of our Derby facility by extending the showroom, improving the used car display and, more importantly, increasing the site’s workshop capacity. A similar exercise will be carried out in Nottingham during 2005.

SPECIALIST CARS 2004 saw a much improved performance from our Specialist Car division. There has been a strong order book for the Bentley Continental and 2005 will see the new Bentley Continental Flying Spur for which we have a very full order book. Maserati introduced the new Quattroporte in 2004 and Ferrari has now released the new 612 and we await the new 430 in April.

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GROUP DEALERSHIPS 2004

OVERVIEW

PLATTS HARRIS In January 2004 we rationalised our agricultural business, Platts Harris, by disposing of three of our sites (enabling us to reduce investment by approximately £2.5 million), restructured the management team, and reduced working capital whilst improving returns. I am delighted to report that this now fully rationalised business has, under its re-aligned management team, moved from a loss of over £100,000 in 2003 to a profit of just under £200,000 this year.

OUTLOOK New car registrations in the first two months of 2005 are down on the previous strong comparable period last year. We have performed slightly ahead of the market, with volumes more in line with those achieved in 2003. However, the number of new cars delivered in the first weeks of the crucial month of March has been more encouraging. Several new models are coming on stream this year from the manufacturers we represent.

VOLUME - 12 PREMIUM - 10 MOTORCYCLES - 2

PREMIUM

Although it is prudent to be cautious about the outlook for new car sales this year, we are confident that 2005 will be another good year for the Group. Our strategy for some time has been to develop the after-sales market. With the acquisition of FPS Distribution, we significantly improved our offering and growth potential in this critical market. More recently, the acquisition of our first used car supermarket in England provides us with additional revenue streams which will ensure that we are less vulnerable to any potential downturn in the new car market. Overall, the Group is in excellent shape. Our commitment to improving the quality of our franchise portfolio and earnings through selective and strategic acquisitions, coupled with a strengthened position in the after-sales market and an increased used car presence, gives us confidence that the Group will continue to make further progress in 2005.

ASTON MARTIN - 1 BENTLEY - 1 FERRARI - 1 LAND ROVER - 5 JAGUAR - 5 CHRYSLER, JEEP - 2 LEXUS - 2 MASERATI - 1 SAAB - 2 VOLVO - 2

VOLUME CITROEN - 1 HONDA - 6 HYUNDAI - 1 MG ROVER - 4 MAZDA - 1 NISSAN - 6 PEUGEOT - 2 RENAULT - 13 SEAT - 1 TOYOTA - 6 VAUXHALL - 14 VOLKSWAGEN - 5

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Finance Director’s Review 2004 GROUP RESULTS

Turnover of £1.1 billion represents a 14 per cent increase on the previous year. Of this, £33 million is accounted for by acquisitions made during the year under review, from which a contribution of £1.2 million to operating profit was made. David Dyson Finance Director 21 March 2005

Gross margins have reduced slightly from 12.4% to 12.0%. Despite this, our tight control of operating costs has resulted in a 20 per cent increase in operating profit before goodwill amortisation and exceptional items. Profit before interest is stated after charging £3.4 million of non-recurring losses (2003: £1.3 million) and a profit on disposal of properties of £0.2 million (2003: £3.1 million). In December 2004, we gave two years’ notice to withdraw from the MG Rover franchise in our four locations in England, Northern Ireland and Scotland. We have considered the impact of that decision and made a provision of £2.8 million to cover the costs of the exit from the franchise over the next two years. Net of all costs, the results have benefited from £15.6 million of exceptional VAT and related interest credits.This has significantly strengthened the Balance Sheet.

INTEREST CHARGES A large proportion of the Group’s borrowings are hedged allowing rates to fluctuate between certain acceptable parameters. During 2004 there were a number of rate rises, and this together with the additional funding costs for the FPS Distribution acquisition, net of the receipt of the exceptional VAT credits, has caused the interest charge before exceptional items to increase from £4.9 million to £6.2 million.

TAX The effective tax rate in 2003 benefited from over £3 million of property profits for which rollover relief was available. The equivalent relief this year is available on only £200,000 of property profits and hence there is a more normalised effective rate of tax.

DIVIDENDS Following the payment of the proposed final dividend, the retained profit for the year is £14.6 million. The anticipated future level of profit retention will ensure a continued strong financial position of our company.

CASH FLOW AND CAPITAL EXPENDITURE I am pleased to report that despite the significant investments made in acquisitions and improving our existing franchise portfolio, our strong operating cash flow of £43 million has enabled us to reduce the gearing from 84 per cent in 2003 to 67 per cent in 2004. In 2005, we will continue to invest with significant capital expenditure planned for our existing businesses. This will be partly offset by the disposal of some of our smaller surplus properties including all those disclosed in the Balance Sheet under the heading “properties held for resale”.

PROPERTY PORTFOLIO The Group last formally re-valued its properties in 1999. At 31 December 2004, the net book value of our freehold and long leasehold portfolio stood at £84 million.

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This is conservatively valued in today’s market and gives us the flexibility we believe is needed to react to changing market conditions and, where appropriate, relocate our businesses whilst generating profits on disposal and provide the necessary cash for reinvestment.

NEW REGULATIONS The Group invested in resources to ensure it received the necessary authorisations from the Financial Services Authority to sell insurance products and intends to maintain the necessary level of investment to remain compliant. Preparations continue for the introduction of the International Financial Reporting Standards (IFRS) that will first impact the Group’s interim statement for the six months to 30 June 2005.The Group has a transition plan in place to manage the conversion to IFRS. We intend to advise our shareholders on the changes more fully in advance of our half-year statement.

David Dyson (left) & Ken Surgenor (right) : LOOKERS FPS DISTRIBUTION LIMITED - MULTIPLE LOCATIONS (acquisition)

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FPS ...building on our success FPS was founded in 1934 and is a nationwide wholesale distributor of vehicle parts to the UK automotive aftermarket. It is the only nationwide operator of its type in the UK. The customer base primarily consists of motor factors (or jobbers). FPS’S TWO MAIN BUSINESS STREAMS ARE: • Same day (‘distress’) delivery of parts required by customers for immediate resale, generally serviced from its national network of 19 distribution branches; and • Overnight fulfilment of customer stock orders (‘distribution’) served from the National Distribution Centre (NDC). The distress business works closely with customers in a service capacity, stocking and providing, on a same day basis, parts that are not economic for motor factor customers to stock and which they could only otherwise source on an overnight basis. Parts proliferation and the ever-widening range of parts available supports future business growth. The distribution business accounts for some 13 per cent of sales, having grown from a zero base over the past three years. Orders for the distribution business are picked and packed centrally at the NDC and delivered overnight to the branches for onward next-day shipment to the factor customer along with their branch-sourced distress orders. FPS sources its products from quality branded suppliers such as Federal-Mogul, Delphi, Gates,TRW, Delco Remy and Valeo. The vast majority of product is received at the NDC in Sheffield for onward distribution to the branch network in the company’s own distribution fleet. The NDC replenishes branches daily for sales made the previous day. Each branch typically holds 20,000 to 25,000 product lines and with the NDC the whole business carries some 70,000 lines. The company has some 650 employees and a 250 vehicle delivery fleet.

FOR 2005 THE KEY DEVELOPMENTS ARE: • Integrated electronic cataloguing – this will provide telesales operators with integrated applications and cross-reference data on their desktop. It will improve call handling efficiency and parts identification. Most significantly it will allow multi-branded programmes to be put together to provide improved range coverage and therefore aid sales development. • Customer connectivity – the current customer on-line trading site has proved very successful, already accounting for some 5 per cent of sales. Although integrated with the FPS system it is not integrated for

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the customer. FPS will therefore link up directly with customer systems to allow them to look up and place orders, providing customers with seamless trading. This will give any connected motor factor instant stock availability and pricing, so that when they are taking an enquiry from their own customer, they will be much better placed to satisfy that customer instantly and close their own sale, at the same time placing an electronic order on FPS. Whilst this is a long term project with long term benefits the first ‘pilots’ will be launched in the first quarter of 2005. • Supplier connectivity – to support customer connectivity FPS will link with suppliers to in turn give FPS telesales operators the ability to check and order against supplier inventories in real time for immediate resale purposes, currently a function completed over the telephone. In addition during 2005, FPS will begin the process of increasing NDC warehouse capacity for 2006 to support its fast growing distribution business of overnight fulfilment of stock orders to factors. FPS have been very successful in developing this, now handling major contracts for Gates and TRW. The trend for suppliers to operate via distributors, similar to the European model, will continue to develop in the coming years, offering further significant growth opportunities for FPS.

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NEW MODELS ...launched in 2004 VAUXHALL ASTRA

VAUXHALL TIGRA

RENAULT GRAND SCENIC

LAND ROVER DISCOVERY 3

JAGUAR S-TYPE DIESEL

PEUGEOT 407

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ASTON MARTIN DB9

2004

CITROËN C4

RENAULT MODUS

VW GOLF

JAGUAR X-TYPE ESTATE

CITROËN C5

MASERATI GRANSPORT

BENTLEY CONTINENTAL GT

MASERATI QUATTROPORTE

FERRARI 612 SCAGLIETTI

VOLVO S40

VOLVO V50

BMW R1200GS

BMW K1200S

CHRYSLER CROSSFIRE ROADSTER

YAMAHA R1

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PROFILE ...of directors Executive Directors

Non-Executive Directors

H. K. Surgenor: CHIEF EXECUTIVE

F. S. Maguire ∆: CHAIRMAN

Aged 60. Commenced as a Director with Charles Hurst in 1986. Deputy Managing Director of the Charles Hurst Group in 1995, and appointed Managing Director in November 1996. Appointed to the Board in 1998 becoming Group Managing Director in January 2001 and appointed as Chief Executive in January 2002.

Aged 63. Joined Charles Hurst in 1986 as Managing Director of Hurst Fuels having previously been involved in the oil and motor industries for 20 years. Appointed Chief Executive of Charles Hurst in 1989 and appointed to the Board of Lookers plc in 1996 becoming Chief Executive in April 1997, and Chairman in January 2001. He is also a Non-Executive Director of Automotive Retail Limited.

D.V. Dyson: FINANCE DIRECTOR Aged 46. Chartered Accountant. Joined the Group in 1992 as Group Financial Controller after 12 years with Deloitte and Touche, Manchester. Appointed to the Board in 2002. D. J. Blakeman: COMPANY SECRETARY Aged 54. Solicitor. Joined the Group in 1984 and appointed a Director in 1989. In addition to his duties as Company Secretary he has responsibility for Group property and human resources. B. Schumacker: OPERATIONS DIRECTOR

Aged 55. Appointed in 1999. Commenced with British Leyland in 1972 becoming Managing Director of Rover Europe in 1992. Appointed to the Board of Audi AG in 1995 and in 1997 became Chief Executive of Rolls Royce and Bentley, until that business was sold to BMW/ VW in 1999. D. C. Mace † ¥ ∆

Aged 56. Joined the Group in 1982, becoming a Regional Director in 1995. Appointed a Director in 2000. He has Group responsibility for Audi, Honda, Saab, Renault (England), Seat, Vauxhall (England),Volkswagen, Group bodyshops and Internet and sub-prime operations.

Aged 50. Appointed in 2002. Currently a Non-Executive Director of GW Pharmaceuticals plc and Center Parcs (uk) Group Plc. In 1987 he led a Management Buy-Out of Sea Life Centre (Holdings) Ltd from Norsk Hydro through to subsequent merger and flotation in 1992 as Vardon plc where he held the position of Director from 1992 to 1996.

A. C. Bruce: OPERATIONS DIRECTOR

N. Clyne †

Aged 39. Joined the Group in 2000 and appointed to the Board in 2002. He was formerly UK Sales Director for Land Rover, and has Group responsibility for Chrysler Jeep, Citroën, Lexus, MG Rover, Mazda, Nissan, Renault (N.I.), PAG, Peugeot, Vauxhall (N.I.),Toyota and Specialist Cars.

Aged 44. Appointed in 2002. Over 18 years’ industry experience gained primarily in sales and sales management including a variety of roles within Woodchester Finance and Lloyds UDT. Currently Vice President of the European Auto Division of GE Consumer Finance.

* Senior independent director † Member of the Audit Committee ¥ Member of the Remuneration Committee ∆ Member of the Nomination Committee

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G. J. Morris * † ¥ ∆

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DIRECTORS’ REPORT for the year ended 31 December 2004

The Directors have pleasure in submitting their report and the audited financial statements for the year ended 31 December 2004. 1. A CTIVITIES The main activities of the Group are the sale, hire and maintenance of motor vehicles and motorcycles, including the sale of tyres, oil, parts and accessories. 2. R EVIEW OF D EVELOPMENTS The full results for the year are set out on page 34. A review of the Group’s activities and future developments are set out in the statements of the Chairman, Chief Executive and Finance Director. 3. D IVIDENDS Ordinary Shares of 25p each. An interim dividend of 4.0p per share (2003: 3.3p per share) was paid on 30 November 2004 and, subject to shareholders’ approval, a final dividend of 8.1p per share (2003: 7.7p per share) is to be paid on 31 May 2005. 4. D IRECTORS The following were Directors of the Company at the end of the financial year. Their interests in the share capital of the Company were as follows:

Ordinary Shares of 25p each 31.12.04 31.12.03

F. S. Maguire

330,715 209,515

H. K. Surgenor

141,897 110,000

D. V. Dyson D. J. Blakeman B. Schumacker

9,970

5,000

123,492 110,000 60,748

44,876

A. C. Bruce

-

-

G. J. Morris

17,090

17,090

D. C. Mace

-

-

N. Clyne

-

-

R. Gaskin

-

-

All holdings are beneficial. There was no change in the interests of the Directors in shares or share options of the Company between 31 December 2004 and 21 March 2005.

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DIRECTORS’ REPORT for the year ended 31 December 2004 (continued)

The mid-market price of the ordinary shares at 31 December 2004 was 327.5p and the range during the year was 261.0p to 331.5p. All Directors retire by rotation. At the forthcoming Annual General Meeting, F.S. Maguire, G.J. Morris and N. Clyne will retire in accordance with the Articles of Association of the Company. F.S. Maguire and N. Clyne being eligible, offer themselves for re-election. G.J. Morris is not seeking re-election. R. Gaskin became an alternate Director for N. Clyne on 16 March 2004. Neither F.S. Maguire, N. Clyne nor R. Gaskin have service contracts with the Company. In an Agreement dated 2 July 1987, the Company agreed to offer Woodchester Investments plc the opportunity to provide, on normal competitive terms, advances on hire purchase to customers of the Group. This Agreement has been extended to 31 December 2005 on the same terms. Woodchester Investments plc which was acquired by General Electric Capital Corporation on 30 December 1997 and its affiliated companies, also provides certain facilities to the Group on competitive terms and in the normal course of business. N. Clyne and R. Gaskin as Directors of GE Capital Woodchester, have an interest in these Agreements. Consult for Success provides consultancy services to the Group. G. J. Morris, as a director of this Company, has an interest in this Agreement. There are no other contracts with the Company or its subsidiaries in which a Director of the Company has any interest, other than service contracts (Executive Directors) or letters of appointment (Non-Executive Directors) 5. A PPROVAL O F T HE D IRECTORS ’ R EMUNERATION R EPORT The Directors’ Remuneration Report will be laid before the Annual General Meeting for adoption as a separate resolution from the Auditor’s Report and the Company’s accounts for the year ended 31 December 2004. 6. E MPLOYEES Employees are encouraged to discuss with management any matters which they are concerned about and factors affecting the Group. In addition, the Board takes account of employees’ interests when making decisions. Suggestions from employees aimed at improving the Group’s performance are welcomed. A significant number of employees are remunerated partly by profit-related bonus schemes. The Group Newsletter (Outlook) is circulated periodically to all employees. The purpose of the Newsletter is to keep employees up to date with Group developments and activities. Communicating in this manner ensures a consistent message. Long service awards were made during the year to those staff with 25 years’ continuous service. Special awards were also made to those staff reaching 40 and 50 years’ service. All employment policies have been updated to conform with current legislation. It is the Group’s policy to encourage career development for all employees to help staff achieve job satisfaction and increase personal motivation. 7. S PECIAL B USINESS O F T HE A NNUAL G ENERAL M EETING (a) Renewal of Directors’ power to allot shares The Special Business of the Annual General Meeting includes an ordinary Resolution (Resolution 8) which gives the Directors the power to allot shares. This authority, which will expire at the end of the Annual General Meeting to be held in 2006, is to allot up to £2,981,089 (11,924,356 shares), being 33.7% of the Company’s issued ordinary share capital as at 21 March 2005. This represents one third of the issued ordinary share capital together with the Company’s obligations in respect of 139,645 ordinary shares for share options which are available for exercise before the date of the next Annual General Meeting. A similar resolution was passed at the last Annual General Meeting and the Directors intend to seek renewal of this authority at subsequent Annual General Meetings. (b) Disapplication of statutory pre-emption rights The Special Business of the Annual General Meeting includes a Special Resolution (Resolution 9) to disapply the pre-emption rights of shareholders to allow the issue of a limited number of shares. This is a resolution that the Directors propose each year at the Annual General Meeting. The Companies Act 1985 requires that, subject to certain exceptions, before Directors of a Company can issue any new shares for cash, the new shares must be offered first to the existing shareholders proportionately to their existing shareholding. This provision can create considerable administrative difficulty, particularly if a rights issue is made, because of the entitlements to fractions of shares which may arise and because of the restrictions imposed on the Company’s ability to offer new shares to certain overseas shareholders by the laws of relevant overseas jurisdiction.

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DIRECTORS’ REPORT for the year ended 31 December 2004 (continued)

As in previous years, the authority would enable the Directors to avoid any difficulty which might arise in those circumstances. It is also customary each year for public companies to take a limited authority to issue new shares for cash without first offering those shares to existing shareholders. Therefore, through this resolution, the Directors are seeking an authority to issue small quantities of shares for cash. The authority is limited to the allotment of up to a maximum nominal value of £441,927 (1,767,708 shares) in ordinary shares, being 5% of the Company’s issued ordinary share capital as at 21 March 2005. This will continue to provide the Directors with flexibility to act in the best interests of the shareholders when opportunities arise. The authority the Directors are seeking will expire at the end of Annual General Meeting to be held in 2006. As usual, they intend to seek renewal of this authority at subsequent Annual General Meetings. (c) Purchase of own shares The Special Business of the Annual General Meeting includes a Special Resolution (Resolution 10) to authorise the Company to make market purchases of its own shares. The resolution specifies the maximum number of shares the Company can buy up to a nominal value of £883,853 (3,535,412 shares) representing 10% of the Company’s issued ordinary share capital as at 21 March 2004, and the maximum and minimum prices at which the Company can buy them, reflecting the requirements of the Companies Act 1985 and the Listing Rules of the UK Listing Authority. As at 21 March 2004, the Company does not have any outstanding options to purchase its own shares pursuant to the authority to buy its own shares granted at the 2004 Annual General Meeting. The Company would only buy shares on the London Stock Exchange. The Board can only use the power to buy shares after considering the effect on earnings per share and the benefits for longer term shareholders. At the 2004 Annual General Meeting, the Company was authorised to make market purchases of its own shares. This resolution is to renew that authority for a further year. It does not mean that the Company will buy its own shares at any particular price or indeed at all. The Directors do not intend at present to use this power but wish to retain the flexibility to do so in the future. The authority would expire at the end of the Annual General Meeting to be held in 2006. As usual the Directors intend to seek renewal of this authority at subsequent Annual General Meetings. (d) Increase in maximum amount payable for Directors’ fees. The Special Business of the Annual General Meeting includes an Ordinary Resolution (Resolution 11) to increase the maximum aggregate annual sum payable to Directors by way of fees for their services as Directors from £200,000 per annum to £300,000 per annum in accordance with Article 102 of the Articles of Association of the Company. The reason for the proposed increase is to reflect the growth in the size of the Group and the need to recruit and provide market competitive rewards for Non-Executive Directors in the form of fees. No Directors’ fees are paid to the Executive members of the Board of the Company who are rewarded in accordance with their individual service contracts under the review of the Remuneration Committee. 8. S CRIP D IVIDENDS At the 2004 Annual General Meeting, the Directors were authorised to offer the ordinary shareholders of the Company the right to elect to receive new ordinary shares, credited as fully paid up, instead of cash in respect of the whole or part of any dividend declared by the Directors or approved by the shareholders. In accordance with the mandate granted to the Directors of the Company at the last Annual General Meeting, the Board have decided to offer new ordinary shares in lieu of the final dividend to those shareholders holding shares on the 8 April 2005 (the record date). A circular setting out the terms of the offer will be sent to shareholders on 18 April 2005. 9. E THICAL E MPLOYMENT It is the Group’s policy to offer equal opportunities to disabled persons applying for vacancies and provide them with the same opportunities for employment, training, career development and promotion as are available to all employees, within the limitations of their aptitude and abilities. Employment within the Group is offered on the basis of the person’s ability to work and not on the basis of their race, individual characteristics, creed or political opinion. .

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19

DIRECTORS’ REPORT for the year ended 31 December 2004 (continued)

10. D ONATIONS Charitable donations amounted to £19,000 (2003: £13,000). No political donations were made (2003: £nil). 11. A UDITORS PricewaterhouseCoopers LLP have expressed their willingness to continue in office and, in accordance with Section 384 of the Companies Act 1985, their re-appointment will be proposed at the Annual General Meeting. 12. S UPPLIER PAYMENTS P OLICY The Group does not formally follow the CBI Prompt Payers’ Code because, in line with industry practice, manufacturers insist upon direct access to our bank accounts and they take funds to pay for both vehicles and parts when they fall due. Other suppliers are generally paid in accordance with their terms of trading. At 31 December 2004, the trade creditors of the Group and the Company represented 39 and 30 days (2003: 39 days and 30 days) purchases respectively. 13. D ERIVATIVES AND F INANCIAL I NSTRUMENTS The Group’s treasury activities are operated within policies and procedures approved by the Board, which include defined controls on the use of financial instruments managing the Group’s risk. The major financial risks faced by the Group relate to interest rates and funding. The policies agreed for managing these risks have remained the same since the beginning of the period under review, and are summarised below. The Group finances its operations by a mixture of retained profits, bank borrowings and commercial paper. To reduce the Group’s exposure to movements in interest rates, the Group seeks to ensure that it has an appropriate balance between fixed and floating rate borrowings. Hedging arrangements are approved by the Board, which consist of interest rate swaps and interest rate collars. The Group seeks to ensure continuity of funding by taking out certain borrowings which are repayable in instalments over periods of at least five years. Short-term flexibility is achieved by overdraft facilities. The Group has no exposure to foreign currency, nor does it undertake any trading in financial instruments. 14. S UBSTANTIAL S HAREHOLDINGS On 21 March 2005 the following shareholders were, so far as the Directors are aware, interested in 3% or more of the issued ordinary share capital of the Company: *Hamilton Finance Limited Schroder Investment Management Limited UBS Global Asset Management Kenneth Henderson Cheevers

8,552,987 3,409,523 2,493,288 1,518,333

shares shares shares shares

(24.2%) (9.6%) (7.1%) (4.3%)

*A wholly owned subsidiary of General Electric Capital Corporation. The Directors have not been notified of any other holders of 3% or more of the issued ordinary share capital. By Order of the Board

D. J. Blakeman, 21 March 2005

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S TAT E M E N T S

ON

C O R P O R AT E G O V E R N A N C E for the year ended 31 December 2004

COMPLIANCE STATEMENT The Board of Directors is collectively accountable to the Company’s shareholders for good corporate governance and is committed to achieve compliance with the principles of corporate governance set out in the 2003 Combined Code of the listing rules of the Financial Services Authority. Throughout 2004 the Company complied with the code provisions of the 2003 Combined Code except as follows: A6.1 The code requires that a formal evaluation of the Board, its committees and its individual directors is conducted. Throughout 2004 a less formal appraisal process was in place which was only partly documented. In 2005 the Board will build on its existing appraisal process in order to comply with the new Combined Code. B1.6 The code requires that notice or contract periods for service contracts be one year or less. The notice periods for H. K. Surgenor and D. J. Blakeman are two years. The Remuneration Committee has carried out a review and decided that the existing contracts would not be changed. The committee felt it was not in the best interests of shareholders to pay for reduced notice periods given the ages of the executives concerned. It is intended that future appointments made will be for one year, but this will be reviewed in the light of market conditions. C3.1 The code requires that the Audit Committee comprises at least three directors, all Non-Executive and independent and at least one with relevant financial experience. In light of this the Finance Director ceased to be a member of the Audit Committee on 4 March 2004. Throughout the year the Audit Committee comprised three Non-Executive Directors, two of whom are independent, but none of whom have recent relevant financial experience although they do have considerable business experience. Therefore, throughout the year, not all of the Audit Committee were Non-Executive and not all were independent within the code definition. A new Audit Committee Chairman is due to be appointed in early 2005, and will be an individual who is both independent and has relevant financial experience. The Nominations Committee met in January 2005 to formalise this process. The Board - The Board of Directors during the financial year under review comprised five Executive Directors and four Non-Executive Directors. Their names and brief biographies appear on page 16. G. J. Morris and D. C. Mace are considered to be independent Non-Executive Directors. R. Gaskin was appointed on 16 March 2004 as alternate Non-Executive Director to N. Clyne. They are appointed as GE Capital’s representatives, and as such are not considered independent. The Code requires a balance of Executive and Non-Executive Directors such that no individual or small group of individuals can dominate the Board’s decision-making process. The number and quality of the Non-Executive Directors on the Board, with their combination of diverse backgrounds and expertise, ensures this Principle is met. The Board recognises that its main functions are as follows: - agreeing objectives, policies and strategies, and monitoring the performance of the executive management - approval of the Group’s strategic plans and business plans - deciding on major changes in organisation and the shape of the Group, including entry into new fields of operation and departure from those which are no longer considered to be appropriate - approving major individual capital projects The Chairman takes responsibility for ensuring the Directors receive accurate, timely and clear information. Monthly financial information is provided to the Directors. Regular and ad hoc reports and presentations are circulated, with all Board and committee papers being issued in advance of meetings by the Company Secretary. In addition to formal Board meetings, the Chairman maintains regular contact with the Chief Executive and the other Directors to discuss specific issues. In furtherance of their duties, the Directors have full access to the services of the Company Secretary and may take independent professional advice at the Company’s expense. The Board believes that given the experience and skills of its particular Directors, the identification of general training needs is best left to the individuals’ discretion. If any particular development need is identified through the Board’s formal appraisal process or by an individual Director, the Company makes the necessary resources available. Director roles - F. S. Maguire is the Non-Executive Chairman and H. K. Surgenor is the Chief Executive. The Chairman leads the Board and represents the Board to the Chief Executive. The Chief Executive manages the Group and implements the strategy and policies adopted by the Board. The division of responsibilities between the role of Chairman and Chief Executive has been set out in writing. G. J. Morris is the Senior Independent Director and his prime responsibility is to provide a communication channel between the Chairman and the Non-Executive Directors and to ensure that the views of each NonExecutive Director are given due consideration. He is resigning prior to the next General Meeting, having completed six years on the Board. At that time, D. Mace will become the Senior Independent Director. The Company Secretary would minute any unresolved concerns expressed by any Director. The Company maintains appropriate directors’ and officers’ insurance in respect of legal action against its Directors.

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S TAT E M E N T S

ON

C O R P O R AT E G O V E R N A N C E

for the year ended 31 December 2004 (continued)

Attendance at meetings - The following table shows the attendance of directors at regular board meetings and at meetings of the Audit and Remunerations Committees.

Scheduled meetings held in 2004 NUMBER

BOARD 6

HELD

NUMBER ATTENDED H. K. Surgenor D. V. Dyson D. J. Blakeman B. Schumacker A. C. Bruce F. S. Maguire G. J. Morris D. C. Mace N. Clyne R. Gaskin (N. Clyne’s alternate) * in attendance by invitation of the committee.

6 6 6 6 6 6 6 6 4 3

AUDIT 3

3* 3* 3* 3* 3 3 -

REMUNERATION 5

5* 1* 5* 5* 5 5 -

The Nominations Committee did not meet during 2004, but have since met in January 2005 to consider the arrangements to secure a successor for G. J. Morris and to review the results of the evaluation of the Board, its Committees and its members, and to consider the formalisation of succession plans for senior management. APPOINTMENT

AND SELECTION OF

DIRECTORS

Appointments The Code requires there to be a formal, rigorous and transparent procedure for the appointment of new directors, which should be made on merit and against objective criteria. The Board has established the Nominations Committee for this purpose and its terms of reference are available from the Company Secretary. The Board approves the appointment and removal of Directors. No new appointments have been made to the Board since the Code was issued. The Board is aware of the other commitments of its Non-Executive Directors and is satisfied that these do not conflict with their duties as Non-Executive Directors of the Company. None of the Executive Directors hold any Executive or Non-Executive positions on other boards. Directors receive induction on their appointment to the Board as appropriate, covering matters such as the operation and activities of the Group (including key financial and business risks to the Group’s activities), the role of the Board and the matters reserved for its decision, the tasks and membership of the principal Board Committees, the powers delegated to those committees, the Board’s governance policies and practices, and the Group’s latest financial information. The training and induction process for Directors is evolving to take into account the development of the Group and applicable governance standards. Major shareholders will be offered the opportunity to meet new Non-Executive Directors as any appointments are made. The requirement to propose Directors for re-appointment at regular intervals is met by applying the Company’s Articles of Association. These require that at each Annual General Meeting not less than one-third of the Directors who are subject to retirement by rotation must retire, and that any Director, who was not appointed at either of the two previous Annual General Meetings and who has served as a Director for more than two years since appointment or last re-appointment has to retire. In accordance with the Code, each new Non-Executive Director is appointed for a specified term, being an initial period from appointment to the next Annual General Meeting where they will be subject to re-appointment at that meeting, for a further period ending not later than the Annual General Meeting held three years thereafter. There is a general assumption on the part of the Board that Non-Executive Directors will not normally be invited to stand for re-appointment after serving six years. Nomination Committee The Nominations Committee comprises F. S. Maguire, G. J. Morris and D. C. Mace and throughout 2004 was chaired by F. S. Maguire. The Committee reviews the size, structure and composition of the Board and Committees and makes recommendations to the Board with regard to any changes that are considered necessary. The Committee also reviews the time required of Non-Executive Directors. The Nominations Committee is responsible for assisting the Board in the formal selection and appointment of Directors and considers succession planning for the Board. It also considers potential candidates and recommends appointments of new Directors to the Board. The appointments are based on merit and against objective criteria including the time available and commitment which will be required of the potential Director.

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C O R P O R AT E G O V E R N A N C E for the year ended 31 December 2004 (continued)

In choosing new Non-Executive Directors the Committee starts by obtaining the views of its professional advisers. The Committee has the power to employ the services of such advisers as it deems necessary in order to carry out its responsibilities and may retain appropriate executive search consultants having prepared a job specification for the role. Performance Evaluation Appraisal The Non-Executive Directors will be appraised individually by the Chairman, and the Non-Executive Directors, led by the senior Non-Executive Director, will, together appraise the Chairman. In 2004, all members of the Board completed a questionnaire regarding Board processes and performance. The Chairman reported the collective findings to the Board in January 2005 and agreed actions required. The Audit, Remuneration and Nomination Committees will in future appraise their performance in this way on an annual basis. ACCOUNTABILITY

AND

AUDIT

Going concern After reviewing the Group’s budget for the current year and its medium term plans, the Directors are confident that the Company and the Group have adequate financial resources to continue in operational existence for the foreseeable future. They have therefore continued to adopt the going concern basis in preparing the accounts. Directors’ statement of responsibilities The Directors are required by the Companies Act 1985 to prepare accounts for each financial year which give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit and loss for the financial year. In preparing the accounts the Directors are required to select appropriate accounting policies and apply them consistently, to make reasonable and prudent judgements and estimates, and to state that all accounting standards which they consider to be applicable have been followed, save as disclosed in the notes to the accounts. The Directors are also required to prepare the accounts on the going concern basis unless it is inappropriate to do so. The Directors have responsibility for ensuring that the Company keeps accounting records which disclose with reasonable accuracy at any time the financial position of the Company and which enable them to ensure that the accounts comply with the Companies Act 1985. The Directors also have responsibility for ensuring the operation of systems of internal control and for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Audit Committee The Audit Committee comprises G. J. Morris, D. C. Mace and N. Clyne, and throughout 2004 was chaired by G. J. Morris. The committee met three times during 2004, with the Chief Executive, Finance Director and the internal and external auditors attending as required. The Audit Committee has reviewed the effectiveness of the system of internal control during the year ended 31 December 2004. This has included consideration of Group-wide risk assessment and of internal audit and internal control exercises undertaken throughout the Group. The Audit Committee has also considered reports from internal and external Auditors. The Audit Committee has reported the results of its work to the Board. The Board has considered these reports when undertaking its review of the effectiveness of the Group’s system of internal control. The Audit Committee is responsible for reviewing a wide range of financial matters including the interim and year end accounts, matters relating to the external audit, corporate governance matters and monitoring the Group’s internal and operational controls. The Audit Committee’s terms of reference are available from the Company Secretary. The Audit Committee has considered the arrangements for the reporting by employees of concerns about possible improprieties in financial reporting or other matters, as set out in the Employee Handbook and has concluded that there is a reasonably clear and adequately defined system for reporting of concerns. This policy and system of reporting will be reviewed annually. Part of the Committee’s responsibility in relation to external auditors is to review the nature of their independence and the extent of the non-audit services they provide. The report from PricewaterhouseCoopers LLP confirming their independence and objectivity was reviewed by the Chairman of the Audit Committee and the Finance Director. The Committee conducted a formal evaluation of the effectiveness of the external audit process and held independent meetings with the external auditors, and have reported on their conclusions to the Board. The Committee has recommended to the Board the re-appointment of the external auditors. Non-audit services are placed with whichever firm is believed to deliver the best value for money, having regard to our external auditors’ independence if PricewaterhouseCoopers LLP were to be appointed. The Group has for many years had separately appointed tax advisors.

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S TAT E M E N T S

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C O R P O R AT E G O V E R N A N C E

for the year ended 31 December 2004 (continued)

Internal Control The Code requires the Company to maintain a sound system of internal control to safeguard shareholders’ investment and the Company’s assets. The Board must review the effectiveness of the system at least annually, covering all material controls, including financial, operational and compliance controls and risk management systems, and report to shareholders that they have done so. The Turnbull Report, adopted by the UK Listing Authority, provides guidance for compliance with that part of the Code. The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. The process has been in place throughout the year and up to the date of approval of the Annual Report and Accounts. It is regularly reviewed by the Board and accords with the guidelines set out in the Turnbull Report. The Directors acknowledge that they are responsible for the Group’s system of internal control, for setting policy on internal control and for reviewing the effectiveness of internal control. The role of management is to implement Board policies on risk and control. The system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable, and not absolute, assurance against material misstatement or loss. The Group has an internal audit function that reports to the Audit Committee. Detailed control procedures exist throughout the operations of the Group and compliance is monitored by management, internal auditors, and to the extent that they consider necessary to support their audit report, external auditors. The Audit Committee has reviewed the effectiveness of the system of internal control during the year ended 31 December 2004. This has included consideration of Group-wide risk assessment and internal control exercises undertaken throughout the Group. The Audit Committee has also considered reports from internal and external auditors. The Audit Committee has reported the results of its work to the Board. The Board has considered these reports when undertaking its review of the effectiveness of the Group’s system of internal control. Relations with shareholders The Company places considerable importance on communications with shareholders and responds to them on a wide range of issues. It has an ongoing programme of dialogue and meetings with major institutional shareholders, where a wide range of relevant issues including strategy, performance, management and governance are discussed. The Chairman makes himself available to meet any major shareholder, as required. All Company announcements are posted on our website - www.lookers.co.uk as soon as they are released. Our website contains a dedicated investor relations section with an archive of past announcements and presentations, historical financial performance, share price data and a calendar of events. The principal communication with private investors is through the Annual Review, the Interim Report and the Annual General Meeting. A presentation is made at the Annual General Meeting to facilitate greater awareness of the Group’s activities. Shareholders are given the opportunity to ask questions of the Board and of the Chairman of each Board Committee and to meet the Directors informally after the meeting. Separate resolutions are proposed for each item of business and the ‘for’ and ‘against’ and ‘abstention’ proxy votes cast in respect of each resolution proposed at the Meeting are counted and announced after the shareholders present have voted on each resolution. Notice of the Annual General Meeting is posted to shareholders at least twenty working days before the date of the Annual General Meeting.

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C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y R E V I E W for the year ended 31 December 2004

CORPORATE SOCIAL RESPONSIBILITY MANAGEMENT The Main Board of Lookers is responsible for setting the Group’s strategy, values and standards regarding social, environmental and ethical issues. It delegates the responsibility for implementing strategy and instilling values and standards throughout the Group’s businesses. The operating companies each include social, environmental and ethical issues in their risk assessment processes. This enables the Main Board to ensure that any potential problems are identified and contingency strategies are in place. Lookers and the Environment Lookers’ activities do have an impact on the environment. The Group is keen to fulfil its legal obligations on this issue. The need to deal with contamination, waste oil and asbestos issues are at the forefront of the Group’s concerns. On a wider level Lookers supports a number of industry initiatives and the Group also engages on all environmental issues raised by stakeholders, consumers, suppliers, shareholders and employees. The Group aims to encourage the reduction of energy and water consumption and actively investigates employees suggestions to help reduce the amount of waste. An electrical testing monitoring regime is in force throughout the Group. Use of the latest building materials is made in the construction of new sites and the refurbishment of existing locations. Lookers aims to reduce its energy, water and fuel costs over the coming year in line with the Group’s expanding operations. Ethics and Lookers Lookers believes that integrity in its relationships with customers, suppliers, staff, shareholders, regulatory agencies and the community is important and gains the respect of all its stakeholders. Lookers makes every effort to ensure its people are aware of these expectations and that they contribute to the high standards required of them. This statement, together with Lookers corporate values, is at the heart of how Lookers conducts its business, externally in its relationships with stakeholders and internally through its performance management and promotion processes. Lookers as an Employer People are crucial to Lookers’ success. This approach is reflected in Lookers’ policies on recruitment and retention, proposed new staff share scheme, staff communication, and health and safety. Recruitment and Retention Lookers ensures that it has fair employment terms for its people. Employment handbooks set out formal policies for key issues such as equal opportunities, disciplinary and grievance procedures, sexual, religious and racial harassment. Lookers’ Human Resources Manager is responsible for raising employment standards and implementing best practice employment policies throughout the organisation. Performance reviews are conducted at least once a year and include an assessment of individual’s training needs. Lookers has a comprehensive training programme for its people which has received industry recognition in the form of national awards for the automotive industry. Staff turnover was around 20% for the year ended 31 December 2004, a below average figure for the motor sector. Staff Communication Lookers believes that its people have a right to be kept informed. Regular discussions take place to keep people updated and to seek out their ideas and opinions. Face-to-face dialogue between managers and staff takes place regularly; information is communicated through Lookers’ intranet, which is used by over 50% of employees every week. Lookers also uses newsletters and updates to keep their staff informed. Health and Safety Lookers aims to do all that is reasonably practicable to ensure the health, safety and welfare of its people, and others who may be affected by its activities. The Main Board maintains ultimate responsibility for health and safety issues at Lookers with the manager responsible for the day to day responsibility, supported by all levels of management. This policy is defined in the Group’s Health and Safety policy statement and all staff are issued with, or have access to, a detailed health and safety guide. The statistics for the Group, under UK Health and Safety regulations for the year ended 31 December 2004 are set out below: 2004

Number of fatalities Injuries resulting in absence over three days Major injuries reported under RIDDOR* Dangerous occurrences reported under RIDDOR* Number of enforcement notices issued by HSE Number of prohibition notices issued by HSE

0 24 7 0 1 2

*Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995 Lookers and the Community Lookers is committed to playing an active role in the communities it serves. All Lookers’ businesses operate their own community programmes and fundraising charity events. In addition some charitable events are supported at a Group level such as cancer relief, the Tsunami relief appeal and similar causes.

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D I R E C T O R S ’ R E M U N E R AT I O N R E P O RT for the year ended 31 December 2004

I NTRODUCTION This report has been prepared in accordance with the Directors’ Remuneration Report Regulations 2002 (“the Regulations”). The report also meets the relevant requirements of the Listing Rules of the Financial Services Authority and describes how the Board has applied the principles of Good Governance relating to Directors’ Remuneration. As required by the Regulations, a resolution to approve the report will be proposed at the Annual General Meeting of the Company at which the financial statements will be laid before members. The Regulations require the auditors to report to the Company’s members on the “auditable part” of the Directors’ Remuneration Report and to state whether in their opinion that part of the report has been properly prepared in accordance with the Companies Act 1985 (as amended by the Regulations). The report has therefore been divided into separate sections for audited and unaudited information. Unaudited Information Remuneration Committee The members of the Remuneration Committee throughout this financial year were D.C. Mace, Chairman and G.J. Morris, both of whom are independent Non-Executive Directors. F.S. Maguire was appointed to the committee on 16 November 2004. Remuneration Policy The policy of the Committee is to ensure that the Directors are fairly rewarded for their individual contributions to the Group’s overall performance and to provide a competitive remuneration package to Executive Directors, including long-term incentive plans and granting of share options to attract, retain and motivate individuals of the calibre required and ensure that the Group is managed successfully in the interests of shareholders. When selecting appropriate comparisons, the Committee has regard to the Group’s turnover, market worth and business sector. No Director plays a part in any decision about his own remuneration. Full details of Directors’ remuneration, fees and share options are set out on pages 29 and 30. Directors retiring by rotation are shown in the Directors’ Report on page 18. None of the Directors currently have any long-term incentives other than the share options noted, which were last granted in 2001 and the Executive Directors are eligible to participate in the Executive Incentive Performance Plan (“EIPP”) which was approved at the Annual General Meeting in May 2003. The Remuneration Committee, in determining remuneration policy, has given full consideration to Section B of the best practice provisions annexed to the Listing Rules of the Financial Services Authority. The Company’s policy is that a substantial proportion of the remuneration of the Executive Directors should be performance related. The annual bonus scheme enables the Executive Directors to earn annual incentive payments on a sliding scale. For example, upon achievement of the predetermined budget, this would equate to between 50% and 60% of their basic salary. The main elements of their remuneration package are as follows: Basic Annual Salary and Benefits in Kind Each Executive Director’s basic salary is reviewed annually by the Committee. In deciding upon appropriate levels of remuneration, the Committee has regard to rates of pay for similar jobs in comparable companies as well as internal factors such as performance. Annual Bonus Payments All Executive Directors participate in an annual bonus scheme payable upon the Group exceeding pre-determined profit level targets and at the discretion of the Remuneration Committee. Subject to the statutory pensions cap, bonus payments are pensionable in order to ensure that the benefits accruing to the Executive Directors are consistent with those accruing to all other contributing members of the scheme. Pension Arrangements The Group operates a defined benefit scheme for its full time employees. D.V. Dyson, B. Schumacker and A. C. Bruce are members of this scheme which provides a pension of up to two-thirds of pensionable salary on retirement at age 60 years. The defined benefit scheme also provides lump sum death-in-service benefit and pension benefits based on final pensionable salary. H.K. Surgenor and D.J. Blakeman participate in money purchase arrangements.

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FINANCIAL STATEMENTS

2004

D I R E C T O R S ’ R E M U N E R AT I O N R E P O RT for the year ended 31 December 2004 (continued)

Share Option Incentives The Company operates a share option scheme under which Executive Directors and senior executives are granted options from time to time by the Board. The last grants were made in September 2001. Once awarded, exercise of share options is conditional on the achievement by the company of performance targets set out at the time of grant. The Executive Incentive Performance Plans Selected Executive Directors as detailed on page 30 participate in the EIPP which was approved by the shareholders at the 2003 Annual General Meeting. Awards under the EIPP are in the form of performance bonuses payable in cash and are based on basic earnings per share growth targets over a pre-determined performance period. In respect of performance bonuses for 2003 and 2004, the performance period ends on 31 December 2005, which is three years after the commencement of the performance period. Performance is measured on earnings per share growth over the three year period and bonuses will be payable where the growth in earnings per share of the Company has exceeded the growth in the Retail Price Index (RPI) by 10% or more. Participating Executives will receive a percentage of their gross salary dependent upon the level of growth over and above the RPI. At 10% over the RPI, participating Executives may earn 20% of gross salary. A stepped scale is then applied up to a maximum of 200% of gross salary if the increase in earnings per share over the period is 50% over and above the RPI. The relevant bonus percentage will be applied to the Executives’ gross annual salary at the end of the performance period to arrive at any bonus payable. Any executive who receives a performance bonus under this plan will be required to invest 20% of their net bonus in the Lookers plc matching share plan. The Executive will also be given the opportunity to invest up to a further 30% of their net bonus in the matching share plan. The proposed rules of the matching share plan will be voted on at the Extraordinary General Meeting convened to take place immediately following the Annual General Meeting in May 2005. Directors’ Contracts The details of the Directors’ individual service contracts are set out in the table below. In the event of termination of an Executive Director’s service contract, depending upon the circumstances, the Company may be liable to pay compensation to the Executive Director equivalent to salary that would have been received during the contract period, together with any bonus earned on a pro rata basis to the date of termination. The Company’s policy in the event of the termination of an Executive Director’s service contract is to avoid any payment to an Executive Director in excess of their contractual entitlement and aim to ensure that any liability is mitigated to the fullest extent possible. F. S. Maguire’s service contract terminated with effect from 31 December 2003 and he is continuing as Non-Executive Chairman by virtue of a fixed term appointment for three years commencing 1 January 2004. The unexpired term is two years. Date of Contract

H. K. Surgenor D. V. Dyson D. J. Blakeman B. Schumacker A. C. Bruce

17 17 17 17 17

August August August August August

2004 2004 2004 2004 2004

Unexpired Term and Notice Period

2 years 1 year 2 years 1 year 1 year

Contractual Termination Payments

Basic Basic Basic Basic Basic

salary salary salary salary salary

and and and and and

benefits benefits benefits benefits benefits

for for for for for

unexpired unexpired unexpired unexpired unexpired

term term term term term

All contracts are rolling contracts and were standardised into modern format on 17 August 2004. Non-Executive Directors The Remuneration of the Non-Executive Directors is determined by the Board within the limits set out in the Articles of Association. Non-Executive Directors cannot participate in the Company’s share option schemes and are not eligible for pension arrangements.

LOOKERS PLC REPORT

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FINANCIAL STATEMENTS

2004

27

D I R E C T O R S ’ R E M U N E R AT I O N R E P O RT for the year ended 31 December 2004 (continued)

Performance Graph The following graph shows the Group’s performance, measured by total shareholder return. The Group has been benchmarked against the FTSE Small-Cap Index which is considered to be an appropriate comparison to other public companies of a similar size.

28

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

D I R E C T O R S ’ R E M U N E R AT I O N R E P O RT for the year ended 31 December 2004 (continued)

AUDITED INFORMATION DIRECTORS’ EMOLUMENTS Fees £000

Salary £000

Annual Bonus £000

Special Bonus £000

Benefitsin-kind £000

2004 Total £000

2003 Total £000

F. S. Maguire H. K. Surgenor D. V. Dyson D. J. Blakeman B. Schumacker A. C. Bruce G. J. Morris D. C. Mace

120 25 25

245 152 121 131 131 -

120 75 60 78 39 -

100 100 63 50 55 55 -

17 14 8 13 8 14 -

237 479 298 244 272 239 25 25

333 379 206 189 188 194 22 22

Total

170

780

372

423

74

1,819

1,533

Neither N. Clyne nor R. Gaskin received any emoluments in their roles as Non-Executive Directors of the Company. Fees include £25,000 for consultancy services provided by Consult for Success of which G. J. Morris is a Director. Benefits in kind include items such as a company car, fuel and life assurance premiums. Details of Directors’ shareholdings are shown in the Directors’ Report on page 17. The relative importance of performance and non-performance elements of remuneration are set out within the Remuneration Policy. A special bonus was paid in respect of the gross £19 million exceptional VAT receipt. The Directors waived emoluments for the year ended 31 December 2004 totalling £188,000 (2003: £nil) DIRECTORS’ PENSION ENTITLEMENT Set out below are details of the pension benefits to which each of the Executive Directors is entitled.

D. V. Dyson B. Schumacker A. C. Bruce

Additional accrued benefits earned in the year £000

Accrued entitlement £000

Transfer value 31 December 2004 £000

Transfer value 31 December 2003 £000

Increase in transfer value £000

2 3 2

21 37 7

204 566 48

154 457 27

50 109 21

Pension increases are in line with Limited Price Indexation. Death-in-service pays at four times salary and death-in-retirement pays benefits at 50%. The accrued pension entitlement is the amount that the Director would receive if he retired at the end of the year. The increase in the transfer value is the difference between the accrued benefit at the year end and that at the previous year end. All transfer values have been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11. The transfer values disclosed above do not represent a sum paid or payable to the individual Director. Instead they represent a potential liability of the pension scheme.

D. V. Dyson B. Schumacker A. C. Bruce

Additional accrued benefits earned in the year (excluding inflation) £000

Transfer value of increase in accrued benefits £000

2 2 2

17 27 15

H.K. Surgenor and D.J. Blakeman have individual money purchase pension plans. The Company made contributions to the personal money purchase plans for H.K. Surgenor of £35,000 (2003: £14,000) and for D.J. Blakeman of £44,000 (2003: £7,000).

LOOKERS PLC REPORT

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FINANCIAL STATEMENTS

2004

29

D I R E C T O R S ’ R E M U N E R AT I O N R E P O RT for the year ended 31 December 2004 (continued)

DIRECTORS’ SHARE OPTIONS Aggregate emoluments disclosed do not include any amounts for the value of options to acquire ordinary shares in the Company granted to, or held, by the Directors. Details of the Directors’ share options are as follows: Date of Grant

Earliest Exercise Date

Expiry Date

Exercise Number at price 1 January (pence) 2004

Exercised in Year

Number at 31 December 2004

Executive 24.7.1996 Executive 9.7.1998 Executive 29.9.2001

24.7.1999 9.7.2001 26.9.2004

23.7.2006 8.7.2005 25.9.2008

146.5 100,000 104.0 21,200 124.0 26,125

100,000 21,200 -

26,125

147,325

121,200

26,125

Scheme

F. S. Maguire

H. K. Surgenor

Executive 26.9.2001

26.9.2004

25.9.2008

124.0

29,917

29,917

-

D.V. Dyson

Company 26.9.2001

26.9.2004

25.9.2011

124.0

9,239

-

9,239

D.J. Blakeman

Executive 26.9.2001

26.9.2004

25.9.2008

124.0

13,492

13,492

-

B. Schumacker

Executive 26.9.2001

26.9.2004

25.9.2008

124.0

15,545

15,545

-

A.C. Bruce

Company 26.9.2001

26.9.2004

25.9.2011

124.0

12,466

-

12,466

The mid - market price of the ordinary shares at 31 December 2004 was 327.5p and the range during the year was 261.0p to 331.5p. The market price when F. S. Maguire, H.K. Surgenor, D.J. Blakeman and B. Schumacker exercised their share options was 298.50p, 287.50p, 287.50p, and 296.50p respectively. None of the terms for the share option schemes have varied during the year. There is no further entitlement to share options. GAINS MADE BY DIRECTORS ON SHARE OPTIONS The table below shows gains made by individual directors before tax from the exercise of share options during 2004. The gains are calculated as at the exercise date, although the shares acquired in 2004 have been retained.

F. S. Maguire H. K. Surgenor D.J. Blakeman B. Schumacker

2004 £

2003 £

193,234 48,914 22,060 26,815

48,250 167,793 -

291,023

216,043

DIRECTORS’ INTERESTS IN THE EXECUTIVE INCENTIVE PERFORMANCE PLAN Awards to Executive Directors under the EIPP long term incentive plans are as follows:

H.K. Surgenor D.V. Dyson D.J. Blakeman B. Schumacker A.C. Bruce

30

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

Cycle Ending

Award date

At 1 January 2004 £000

Amount awarded £000

At 31 December 2004 £000

Vesting date

2005 2005 2005 2005 2005

08.05.03 08.05.03 08.05.03 08.05.03 08.05.03

480 280 240 260 260

40 50 12 13 13

520 330 252 273 273

31.12.05 31.12.05 31.12.05 31.12.05 31.12.05

D I R E C T O R S ’ R E M U N E R AT I O N R E P O RT for the year ended 31 December 2004 (continued)

Details of the performance conditions attaching to the EIPP are set out on page 27. Bonuses under the EIPP are payable in cash based on the Executive’s salary at the end of each performance period. The amount at 31 December 2004 represents the maximum possible award for each Executive, based on their salary at 31 December 2004. The amount awarded in the year represents the increase in maximum possible award as a result of salary increases during 2004. The maximum award is only payable if earnings per share growth is greater than RPI + 50% over the three year period to 31 December 2005. If earnings per share growth over the performance period is less than RPI + 10%, no performance bonus is payable. All awards under the EIPP are in respect of qualifying services. There have been no variations in the terms and conditions of scheme interests during the year.

The Company’s Register of Directors’ Interests contains full details of Directors’ shareholdings and options to subscribe. By Order of the Board

D. J. Blakeman, 21 March 2005

LOOKERS PLC REPORT

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FINANCIAL STATEMENTS

2004

31

INDEPENDENT AUDITORS’ REPORT

Independent Auditors’ Report to the Members of Lookers plc We have audited the financial statements which comprise the consolidated profit and loss account, the consolidated and company balance sheets, the consolidated cash flow statement, the statement of total recognised gains and losses and the related notes which have been prepared under the historical cost convention (as modified by the revaluation of certain fixed assets) and the accounting policies set out in the statement of accounting policies. We have also audited the disclosures required by Part 3 of Schedule 7A to the Companies Act 1985 contained in the directors’ remuneration report (“the auditable part”). Respective Responsibilities of Directors and Auditors The Directors’ responsibilities for preparing the annual report and the financial statements in accordance with applicable United Kingdom law and accounting standards are set out in the statement of Directors’ responsibilities. The directors are also responsible for preparing the Directors’ remuneration report. Our responsibility is to audit the financial statements and the auditable part of the Directors’ remuneration report in accordance with relevant legal and regulatory requirements and United Kingdom Auditing Standards issued by the Auditing Practices Board. This report, including the opinion, has been prepared for and only for the company’s members as a body in accordance with Section 235 of the Companies Act 1985 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the auditable part of the Directors’ remuneration report have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors’ report is not consistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding Directors’ remuneration and transactions is not disclosed. We read the other information contained in the annual report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. The other information comprises only the review of the Chairman, Chief Executive and Finance Director, the Directors’ Report, the unaudited part of the Directors’ Renumeration Report, the statement on Corporate Governence and the Corporate Social Responsibility Review. We review whether the corporate governance statement reflects the Company’s compliance with the nine provisions of the 2003 FRC Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the Board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and control procedures. Basis of audit opinion We conducted our audit in accordance with auditing standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the auditable part of the Directors’ remuneration report. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the auditable part of the Directors’ remuneration report are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion: • the financial statements give a true and fair view of the state of affairs of the Company and the Group at 31 December 2004 and of the profit and cash flows of the Group for the year then ended; • the financial statements have been properly prepared in accordance with the Companies Act 1985; and • those parts of the Directors’ remuneration report required by Part 3 of Schedule 7A to the Companies Act 1985 have been properly prepared in accordance with the Companies Act 1985. PricewaterhouseCoopers LLP Chartered Accountants and Registered Auditors Manchester 21 March 2005

32

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

PRINCIPAL ACCOUNTING POLICIES

The financial statements have been prepared in accordance with the Companies Act 1985 and applicable accounting standards. The particular accounting policies adopted are described below. 1. A CCOUNTING C ONVENTION The financial statements and supporting notes set out on pages 33 to 52 inclusive are prepared under the historical cost convention, as modified by the revaluation of certain properties. 2. B ASIS OF C ONSOLIDATION The consolidated profit and loss account and balance sheet include the financial statements of the parent company and all its subsidiaries made up to the end of the financial period. The results of subsidiary undertakings acquired or sold during the year are included in the consolidated profit and loss account from the date of acquisition or to the date of disposal. Intergroup sales and profits are eliminated on consolidation so that the figures shown by the consolidated statements relate to external transactions only. 3. G OODWILL Goodwill represents the difference between the fair value of the separately identifiable tangible assets/liabilities acquired and the fair value of the consideration given. Goodwill arising on the acquisition of a business is capitalised and amortised on a straight line basis over its estimated useful life, normally in the range from ten to twenty years. 4. D EFERRED TAXATION Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the Balance Sheet date, where transactions or events that result in an obligation to pay more, or a right to pay less tax, in the future have occurred at the Balance Sheet date with the following exception: Deferred tax assets are only recognised to the extent that the Directors consider it more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing difference can be deducted. Deferred tax is measured on a non-discounted basis. 5. F IXED A SSETS The transitional rules of FRS 15 “Tangible Fixed Assets” have been adopted in the case of properties, where the valuation of £63,273,000 has not been updated since 31 December 1999 and the valuation has been frozen as modified cost. The Group is not continuing the valuation policy relating to properties. All fixed assets acquired since that date are recorded at cost. Freehold buildings and long leasehold properties are depreciated over 50 years on a straight line basis to their estimated residual values. Short leasehold properties are amortised by equal instalments over the periods of the respective leases. Plant, machinery, including motor vehicles, fixtures, fittings, tools and equipment including computer equipment and terminals, are depreciated on a straight line basis at rates varying between 10% and 33% per annum over their estimated useful lives. Properties are transferred to “Properties held for resale” when management expect their disposal to be completed within one year from the balance sheet date. Properties held for resale are stated at the lower of net book value or expected proceeds. 6. L EASES Assets purchased under hire purchase contracts are capitalised in the balance sheet and are depreciated over their useful lives. The interest element of the rental obligation is charged to the profit and loss account so as to give a constant rate of charge on the remaining balance of the obligation. Rental costs under operating leases are charged to the profit and loss account in equal annual amounts over the periods of the leases. 7. S TOCKS Stocks are valued at the lower of cost and net realisable value. Deposits paid for vehicles on consignment represent bulk deposits paid to manufacturers. The Group recognises consignment stock in its balance sheet when there has been a substantial transfer of the risks and rewards of ownership. The related liabilities are included in trade creditors. 8. T URNOVER Turnover is measured at invoice price, excluding discounts and value added taxes, and principally comprises external vehicle sales, parts, servicing and bodyshop sales. Vehicle and parts sales are recognised at the time of delivery to the customer. Service and bodyshop sales are recognised in line with the work performed. Turnover also comprises commissions receivable for arranging vehicle financing. Commissions are based on agreed rates and income is recognised at the time of approval of the vehicle finance by the finance provider. 9. P ENSION C OSTS Contributions to the defined benefit scheme are charged to the profit and loss account so as to spread the cost of pensions over employees’ estimated working lives with the Group. The contribution rate is recommended by a qualified actuary on the basis of triennial valuations, using the projected unit method. This scheme has now been closed to new members. The Group also provides pension arrangements for employees and certain Directors under defined contribution schemes. Contributions for these schemes are charged to the profit and loss account in the year in which they are payable. The Group has made the necessary disclosures in respect of FRS 17 “Retirement Benefits” under the transitional arrangements. Accordingly, there has been no impact on the profit and loss account or balance sheet in 2004. 10. I NVESTMENTS Investments held as fixed assets are stated at cost less provision for impairment. 11. D ERIVATIVE F INANCIAL I NSTRUMENTS Group treasury matters are managed within policy guidlines approved by the Board. The major financial risks faced by the Group relate to interest rates and funding. The Group uses derivative financial instruments to reduce exposure to interest rate movements and seeks to ensure that it has an appropriate balance between fixed and floating rate borrowings. The Group does not hold or issue derivative financial instruments for speculative purposes. Further details of the Group’s financial instruments are included with note 24.

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

33

C O N S O L I D AT E D P R O F I T

AND

LOSS ACCOUNT

for the year ended 31 December 2004

2004 £000

2003 £000

1,029,055 33,252 31,445

923,926 37,519

1,093,752 (962,750)

961,445 (842,605)

2

131,002 (103,504)

118,840 (101,778)

Operating profit before goodwill and exceptional items Net exceptional items 2 Goodwill amortisation 10

21,477 7,248 (1,227)

17,933 (871)

26,756 1,519 (777)

16,892 170

27,498 (3,425) 231

17,062 (1,307) 3,143

24,304

18,898 (4,873) -

Note

Turnover – Continuing brands – Acquisitions – Discontinuing brands

1

Cost of sales Gross profit Operating costs

OPERATING PROFIT – Continuing brands – Acquisitions – Discontinuing brands Loss on disposal/termination of businesses Profit on disposal of properties PROFIT

4 4

BEFORE INTEREST AND TAXATION

Interest payable Interest receivable Interest received on exceptional items

2

(6,465) 306 8,400

Net interest receivable/(payable)

3

2,241

(4,873)

PROFIT ON Taxation

4 5

26,545 (7,701)

14,025 (3,562)

7

18,844 (4,275)

10,463 (3,893)

PROFIT RETAINED FOR THE YEAR Profit and loss account brought forward Transfers to/(from) reserves

20 20

14,569 38,721 718

6,570 46,319 (14,168)

Profit and loss account carried forward

PROFIT

ORDINARY ACTIVITIES BEFORE TAXATION

FOR THE FINANCIAL YEAR ATTRIBUTABLE TO

SHAREHOLDERS

Dividends

20

54,008

38,721

Basic earnings per ordinary share

8

53.6p

30.1p

Diluted earnings per ordinary share

8

53.5p

29.8p

Adjusted earnings per ordinary share

8

32.3p

26.2p

There was no material difference between the historical cost profits and those shown above.

S TAT E M E N T

OF

T O TA L R E C O G N I S E D G A I N S

AND

LOSSES

for the year ended 31 December 2004

34

2004 £000

2003 £000

Profit for the financial year Adjustment on disposal of properties

18,844 717

10,463 294

Total recognised gains and losses relating to the year

19,561

10,757

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

C O N S O L I D AT E D B A L A N C E S H E E T as at 31 December 2004

2004 Note

FIXED ASSETS Intangible fixed assets Tangible fixed assets

10 11

CURRENT ASSETS Properties held for resale Stocks Debtors Cash at bank and in hand Creditors: Amounts falling due within one year NET

£000

TOTAL

10,605 92,763

118,243

103,368

199,145

142,236

15

(184,298)

(140,490)

19 20

3,511 97,463 41,229 33

14,847

1,746

133,090

105,114

(43,700) (3,685)

(33,103) (1,424)

85,705

70,587

8,838

8,754

1,579 6,689 14,591 54,008

EQUITY SHAREHOLDERS’ FUNDS

21

£000

23,494 94,749

1,792 140,410 54,429 2,514

16 18

CAPITAL & RESERVES Called up share capital Reserves Share premium Revaluation reserve Capital redemption reserve Profit and loss account

£000

13 14

CURRENT ASSETS

Total assets less current liabilities Creditors: amounts falling due after more than one year Provisions for liabilities and charges

2003 £000

1,114 7,407 14,591 38,721 76,867

61,833

85,705

70,587

The financial statements on pages 33 to 52 were approved by the Directors on 21 March 2005. Signed on behalf of the Board of Directors.

H. K. Surgenor

}

Directors

D. V. Dyson

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

35

PARENT COMPANY BALANCE SHEET as at 31 December 2004

2004 Note

FIXED ASSETS Tangible fixed assets Investments

11 12

CURRENT ASSETS Debtors Cash at bank and in hand

14

Creditors: amounts falling due within one year NET

£000

15

47,021 8,836

97,132

55,857

(41,846)

TOTAL

19 20

(34,677) 55,286

21,180

109,311

79,303

(33,732) (190)

(18,021) (102)

75,389

61,180

8,838

8,754

1,579 14,591 50,381

EQUITY SHAREHOLDERS’ FUNDS

1,114 14,591 36,721 66,551

52,426

75,389

61,180

The financial statements on pages 33 to 52 were approved by the Directors on 21 March 2005. Signed on behalf of the Board of Directors.

H. K. Surgenor

}

D. V. Dyson

36

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

Directors

£000

367 57,756 58,123

86,172 10,960

16 18

CAPITAL & RESERVES Called up share capital Reserves Share premium Capital redemption reserve Profit and loss account

£000

350 53,675 54,025

CURRENT ASSETS

Total assets less current liabilities Creditors: amounts falling due after more than one year Provisions for liabilities and charges

2003 £000

C O N S O L I D AT E D C A S H F L O W S TAT E M E N T for the year ended 31 December 2004

2004 £000

NET

2003 £000

£000

£000

CASH INFLOW FROM OPERATING ACTIVITIES

BEFORE NON-OPERATING EXCEPTIONAL ITEMS

43,001

16,617

Outflow relating to non-operating exceptional items

(1,586)

(2,469)

Net cash inflow from operating activities

41,415

14,148

RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received on exceptional item (note 2) Interest received Interest paid Non-equity dividends paid

8,400 306 (5,966) -

(4,489) (286)

Net cash inflow/(outflow) from returns on investments and servicing of finance TAXATION UK corporation tax paid CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Purchase of tangible fixed assets Sale of tangible fixed assets Net cash outflow from capital expenditure and financial investment ACQUISITIONS AND DISPOSALS Proceeds from disposal of businesses Purchase of subsidiary undertakings and other acquisitions Net cash acquired with subsidiary

(4,775)

(2,372)

(3,569)

(11,915) 9,463

(10,816) 9,426 (2,452)

789 (34,355) (537)

Net cash outflow from acquisitions and disposals EQUITY

2,740

614 (15,089) 1,046 (34,103)

DIVIDENDS PAID

(13,429)

(4,107)

(3,600)

1,121

(12,615)

Net cash inflow/(outflow) before financing FINANCING Preference shares redeemed New shares issued Repayment of loans Increase in loans (Decrease)/increase of capital element of hire purchase contracts

(1,390)

549 (16,943) 30,000 (90)

(13,889) 273 (10,096) 27,889 39

Net cash inflow from financing

13,516

4,216

INCREASE/(DECREASE)

14,637

(8,399)

IN CASH IN THE YEAR

Additional information on the cash flow statement is set out below and in note 22. Reconciliation of operating profit to net cash inflow from operating activities before non-operating exceptional items Operating profit Depreciation charges Goodwill amortisation Profit on sale of fixed assets Increase in stocks Decrease/(increase) in debtors Increase in creditors Increase in business closure provisions Net cash inflow from operating activities before non-operating exceptional items

27,498 3,988 1,227 (170) (24,596) 3,590 34,214 (2,750)

17,062 3,686 871 (21) (14,077) (1,832) 10,928 -

43,001

16,617

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

37

NOTES

TO

THE

F I N A N C I A L S TAT E M E N T S

for the year ended 31 December 2004

1. SEGMENTAL

ANALYSIS

Turnover Operating profit before exceptional items Operating exceptional items (note 2) Operating profit Loss on disposal/termination of business Profit on disposal of properties Interest receivable/(payable)

Motor trade £000

Agriculture £000

2004 Total £000

1,083,458

10,294

1,093,752

20,025 7,248 27,273 (3,357) 231 2,285

225 225 (68) (44)

20,250 7,248 27,498 (3,425) 231 2,241

Profit on ordinary activities before taxation

26,432

113

26,545

Net assets/(liabilities)

85,892

(187)

85,750

Motor trade £000

Agriculture £000

2003 Total £000

945,156

16,289

961,445

Operating profit /(loss) (Loss)/profit on disposal/termination of businesses Profit on disposal of properties Interest payable

17,140 (1,974) 3,143 (4,827)

(78) 667 (46)

17,062 (1,307) 3,143 (4,873)

Profit on ordinary activities before taxation

13,482

543

14,025

Net assets/(liabilities)

71,379

(792)

70,587

Turnover

All turnover and profit arises in the UK. All the results for the year are from continuing activities. The motor trade segment figures include the following amounts relating to acquisitions: turnover £33,252,000, cost of sales £28,711,000, gross profit £4,541,000, selling and distribution expenses £1,590,000, administrative costs £1,432,000, operating profit £1,519,000 and net assets £21,827,000. £292,000 goodwill amortisation has been charged to the profit and loss account in 2004 in relation to acquired businesses. The motor trade segment figures also include the following amounts relating to discontinuing brands (note 4): turnover £31,445,000 (2003: £37,519,000), cost of sales £27,084,000 (2003: £32,120,000), selling and distribution expenses £4,607,000 (2003: £4,633,000), administrative costs £532,000 (2003: £595,000), operating loss £777,000 (2003: profit £170,000) and net assets £3,611,000 (2003: £4,035,000). 2. OPERATING

COSTS

Selling and distribution costs Administrative costs Other operating income

Ordinary £000

Exceptional £000

2004 Total £000

2003 Total £000

81,687 30,916 (1,851)

(7,248)

81,687 30,916 (9,099)

74,674 27,822 (718)

110,752

(7,248)

103,504

101,778

The exceptional item relates to the VAT refund which was received in the current year from HM Customs and Excise, net of professional expenses, and a bonus paid to Directors in relation to this exceptional income. Net interest receivable in relation to this income is disclosed in Note 3. We have received legal advice indicating that there are good grounds for some or all of the VAT recovery and associated interest not to be subject to Corporation Tax.

38

LOOKERS PLC REPORT

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FINANCIAL STATEMENTS

2004

NOTES

TO

THE

F I N A N C I A L S TAT E M E N T S for the year ended 31 December 2004 (continued)

3. NET

INTEREST (RECEIVABLE)

/

PAYABLE

On amounts wholly repayable within five years Bank loans and overdrafts Hire purchase and other interest Interest on consignment vehicles On amounts repayable wholly or in part after five years Bank loans

Interest receivable - bank Interest received on VAT exceptional item (Note 2)

4. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION Profit on ordinary activities before taxation is stated after charging/(crediting): Charged/(credited) within operating profit Employee costs (note 9) Operating lease rentals payable – Hire of plant and machinery – Property Auditors’ remuneration Audit Services Statutory audit Further assurance services Services relating to aquisition of FPS Distribution Limited Other services not covered above Depreciation of tangible fixed assets Amortisation of goodwill Profit on sale of fixed assets Exceptional item (Note 2) Charged/(credited) after operating profit Loss on disposal/termination of businesses Profit on sale of properties Interest received on exceptional items (Note 2)

2004 £000

2003 £000

3,715 151 1,958

2,766 168 1,287

641

652

6,465 (306) (8,400) (2,241)

4,873 4,873

2004 £000

2003 £000

79,610 1,368 2,690

70,242 679 2,121

214

163

184 18 3,988 1,227 (170) (7,248)

5 3,686 871 (21) -

3,425 (231) (8,400)

1,307 (3,143) -

The audit fees in respect of the Company were £13,000 (2003: £12,000). During the year the Group disposed of dealerships at Thornaby, Manchester and Macclesfield for a total cash consideration of £789,000. None of these disposals/terminations are considered material to the Group. The Group has also given two years notice to MG Rover in accordance with its Franchise Agreement to exit from its four MG Rover outlets. An exceptional provision of £2,750,000 has been made in respect of future trading losses and exit costs. Taking into account the costs of exiting and terminating these business activities, the Group incurred a net loss on disposal and termination of £3,425,000 (2003: £1,307,000). The tax credit in relation to the loss on disposal/termination of businesses was £946,000 (2003: tax credit £392,000). There is no tax liability in respect of the profits on sale of properties due to the benefit of rollover relief.

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

39

NOTES

TO

THE

F I N A N C I A L S TAT E M E N T S

for the year ended 31 December 2004 (continued)

5. TAXATION

ON PROFIT ON ORDINARY ACTIVITIES

2004 £000

2003 £000

9,192 (1,021)

2,685 921

(154) (316)

(29) (15)

7,701

3,562

2004

2003

Standard rate of corporation tax Capital profits and other non-taxable items Items not allowable for taxation (including goodwill amortisation) Capital allowances in excess of depreciation Short term timing differences Adjustments to prior year’s taxation

30.0% (1.4)% 3.2% 0.5% 2.3% (0.6)%

30.0% (10.5)% 4.8% (1.2)% (4.0)% (0.2)%

Effective rate on current profits

34.0%

18.9%

Taxation on the profit for the year Corporation tax at 30% (2003: 30%) Deferred taxation Adjustments relating to prior years Corporation tax Deferred taxation

The current corporation tax charge was affected by the following factors:

The future tax rate will depend on the level of profits on sale of properties and the Group’s ability to obtain rollover relief.

6. PARENT COMPANY PROFIT The consolidated profit and loss account includes a profit of £17,935,000 (2003: £7,966,000) which is dealt with in the financial statements of the parent company. As permitted by S.230 of the Companies Act 1985 the profit and loss account of the parent company is not presented as part of these financial statements.

7. DIVIDENDS 2004 £000

Equity ordinary shares Interim dividend of 4.0p per share paid 30 November 2004 (2003: 3.3p per share) Final dividend 8.1p per share payable on 31 May 2005 (2003: 7.7p per share)

2003 £000

1,411

£000

£000

1,197

2,864

2,696 4,275

3,893

8. EARNINGS PER SHARE The calculation of earnings per ordinary share is based on profits on ordinary activities after taxation amounting to £18,844,000 (2003: £10,463,000) and a weighted average of 35,133,817 ordinary shares in issue during the year (2003: 34,777,983 ordinary shares). The diluted earnings per share is based on the weighted average number of shares, after taking account of the dilutive impact of shares under option of 85,266 (2003: 315,256). The diluted earnings per share is 53.5p (2003: 29.8p) Adjusted earnings per share is stated before goodwill amortisation, loss on disposal/termination of businesses, the profit on disposal of properties and the exceptional VAT credit and is calculated on profits of £11,365,000 for the year (2003: £9,106,000). The individual impact on earnings per share of the aforementioned items is set out below:

40

LOOKERS PLC REPORT

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FINANCIAL STATEMENTS

2004

NOTES

TO

THE

F I N A N C I A L S TAT E M E N T S for the year ended 31 December 2004 (continued)

8. EARNINGS

PER SHARE (continued)

2004

Earnings attributable to ordinary shareholders Goodwill amortisation Loss on disposal/termination of businesses (note 4) Tax credit on loss on disposal of businesses Profit on disposal of properties Exceptional credit re VAT and interest (notes 2 and 3) Tax charge on exceptional VAT credit (note 2) Adjusted

2003

Earnings £000

Earnings per share P

Earnings £000

Earnings per share P

18,844 1,227 3,425 (946) (231) (15,648) 4,694

53.6 3.5 9.7 (2.7) (0.7) (44.5) 13.4

10,463 871 1,307 (392) (3,143) -

30.1 2.5 3.7 (1.1) (9.0) -

11,365

32.3

9,106

26.2

Adjusted earnings per share is considered by the Directors to be a more meaningful indication of the Group’s underlying performance.

9. INFORMATION REGARDING EMPLOYEES 2004

Employee costs during the year Wages and salaries Social security costs Other pension costs

Average number employed during the year (including Directors) Productive Selling and distribution Administration

2003

£000

£000

72,147 6,705 758

63,475 5,658 1,109

79,610

70,242

2004

2003

1,011 1,830 794

1,010 1,591 705

3,635

3,306

The disclosures required by the Companies Act with regard to the Directors Renumeration are disclosed in the audited part of the Directors’ Renumeration Report.

10. INTANGIBLE

FIXED ASSETS

Goodwill £000

The Group Cost As at 1 January 2004 Additions

24,878 14,116

As at 31 December 2004

38,994

Amortisation As at 1 January 2004 Charge for the year

14,273 1,227

As at 31 December 2004

15,500

Net book value at 31 December 2004

23,494

Net book value at 31 December 2003

10,605

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

41

NOTES

TO

THE

F I N A N C I A L S TAT E M E N T S

for the year ended 31 December 2004 (continued)

10. INTANGIBLE FIXED ASSETS (continued) Acquisitions On 12 August 2004, the Group acquired the business and assets of FPS Distribution Limited for a cash consideration of £32,007,000. A table detailing the assets and liabilities acquired at fair value is set out below. Fair value adjustments totalling £1,000,000 have been made to reflect the dilapidation costs for leasehold properties and net realisable value of stock.

Tangible fixed assets Stocks Debtors Creditors Hire purchase creditor Overdrafts Provisions for liabilities and charges Provision for deferred tax Net assets acquired

Book Value £000

Revaluations £000

Provisional Fair Value £000

1,518 17,998 15,056 (14,501) (209) (537) (48)

(200) (800) -

1,518 17,798 15,056 (14,501) (209) (537) (800) (48)

19,277

(1,000)

18,277

Goodwill

13,730

Consideration - satisfied by cash

32,007

From the date of aquisition to 31 December 2004 FPS Distribution Limited contributed £28,626,000 to turnover, £1,650,000 to profit before interest and £1,685,000 to profit after interest. FPS Distribution Limited contributed an outflow of £1,162,000 to the group’s net operating cash flows, received £40,000 of interest, paid £360,000 in respect of taxation and utilised £368,000 for capital expenditure. The goodwill recognised in the acquisition of FPS Distribution Limited is being amortised over 20 years. In the last financial year to 31 March 2004, FPS Distribution Limited made a profit after tax and minority interests of £2,793,000. For the period since that date to the date of aquisition, FPS management accounts show: £000

Turnover Operating profit Profit before taxation Taxation and minority interests Profit attributable to shareholders

24,741 1,615 1,625 515 1,110

On 5 October 2004, the Group acquired the businesses of Chester Saab and VW Northallerton for cash consideration of £879,000 and £635,000 respectively. On 29 October 2004 the business of VW Darlington was acquired for cash consideration of £834,000. These acquisitions have been accounted for by the acquisition method of accounting. None of the individual acquisitions were considered to be material to the Group. A table detailing the assets and liabilities acquired at fair value is set out below.

Revaluations £000

Tangible fixed assets Stocks Debtors Creditors

1,003 1,031 15 (87)

-

1,003 1,031 15 (87)

Net assets acquired

1,962

-

1,962

Goodwill

386

Consideration - satisfied by cash

42

Provisional Fair Value £000

Book Value £000

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

2,348

NOTES

TO

THE

F I N A N C I A L S TAT E M E N T S for the year ended 31 December 2004 (continued)

11. TANGIBLE

Freehold Property

Long Leasehold Property

Short Leasehold Property

Plant & Machinery

Fixtures, Fittings, Tools & Equipment

Total

£000

£000

£000

£000

£000

£000

56,201 494 6,269 (8,049)

30,574 2,322 (61)

2,125 222 152 -

10,372 185 1,353 (2,777)

11,412 1,620 1,819 (1,913)

110,684 2,521 11,915 (12,800)

As at 31 December 2004 Depreciation As at 1 January 2004 Charge for the year Disposals

54,915

32,835

2,499

9,133

12,938

112,320

2,297 520 (133)

943 241 (5)

185 68 -

6,886 1,243 (2,383)

7,610 1,916 (1,817)

17,921 3,988 (4,338)

As at 31 December 2004

FIXED ASSETS

The Group Cost or valuation As at 1 January 2004 On acquisition (note 10) Additions in the year Disposals

2,684

1,179

253

5,746

7,709

17,571

Net book value at 31 December 2004

52,231

31,656

2,246

3,387

5,229

94,749

Net book value at 31 December 2003

53,904

29,631

1,940

3,486

3,802

92,763

Assets held under finance leases, capitalised and included in plant & machinery and fixtures and fittings:

Cost Aggregate depreciation

2004 £000

2003 £000

569 (158)

92 (31)

411

61

Net book value

Modified Historical Cost On 31 December 1999 the properties were re-valued at £63,273,000 on the basis of Existing Use Value in England by Messrs. Donaldsons, Chartered Surveyors, and in Northern Ireland by Messrs. Hamilton Osborne King, Chartered Surveyors. As stated in the accounting policies the valuation of properties has not been updated since this date. Summary balances in respect of all properties are as follows:

31/12/99 Valuation £000

Historical Cost Convention £000

The Group Gross book value

90,249

83,560

Net book value

86,133

79,444

Fixtures, Fittings, Tools & Equipment £000

The Company Cost As at 1 January 2004 Additions in the year Disposals

1,134 218 (21)

As at 31 December 2004

1,331

Depreciation As at 1 January 2004 Charge for the year Disposals

767 233 (19)

As at 31 December 2004

981

Net book value at 31 December 2004

350

Net book value at 31 December 2003

367

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

43

NOTES

TO

THE

F I N A N C I A L S TAT E M E N T S

for the year ended 31 December 2004 (continued)

11. TANGIBLE

FIXED ASSETS (continued)

Future capital expenditure

Contracted but not provided in the financial statements

Group

Company

2004 £000

2003 £000

2004 £000

2003 £000

1,550

4,550

-

-

12. INVESTMENTS Subsidiary Companies £000

Company Cost As at 1 January 2004 Transfer to subsidiary company

57,756 (4,081)

As at 31 December 2004

53,675

Details of the principal subsidiary undertakings are as follows: DSM Autos Limited Bolling Investments Limited Charles Hurst Limited Charles Hurst Motors Limited Lookers North West Limited Lookers Southern Limited Lookers Birmingham Limited FPS Distribution Limited All subsidiary companies are incorporated and registered in England and operate in England and Wales with the exception of Charles Hurst Limited and Charles Hurst Motors Limited which are incorporated, registered and operate in Northern Ireland. All subsidiary companies are wholly owned with the exception of Lookers Birmingham Limited and Charles Hurst Motors Limited in which 99% shareholdings are held. A full list of subsidiary undertakings will be annexed to the Company’s next Annual Return. 13. STOCKS

Group

Goods for resale Bulk deposit paid for vehicles on consignment Consignment vehicles

2004 £000

2003 £000

111,223 2,074 27,113

92,139 1,528 3,796

140,410

97,463

Vehicle stocks held under consignment stocking agreements which are not deemed to be assets of the Group under the provision of FRS5 and are not included in the balance sheet amounted to £1,500,000 (2003: £17,907,000). 14. DEBTORS Group

Trade debtors Amounts owed by group undertakings Other debtors Prepayments

44

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

Company

2004 £000

2003 £000

2004 £000

2003 £000

42,639 4,029 7,761

32,019 4,330 4,880

127 81,647 2,869 1,529

88 43,771 1,578 1,584

54,429

41,229

86,172

47,021

NOTES

TO

THE

F I N A N C I A L S TAT E M E N T S for the year ended 31 December 2004 (continued)

15. CREDITORS:

AMOUNTS FALLING DUE WITHIN ONE YEAR

Group

Bank loans and overdrafts Hire purchase creditors Trade creditors Consignment vehicle creditors Amounts owed by group undertakings Taxation and social security Other creditors Accruals and deferred income Dividends payable

16. C REDITORS : A MOUNTS

Company

2004 £000

2003 £000

2004 £000

2003 £000

16,474 163 95,058 27,113 13,798 17,533 11,295 2,864

26,188 26 78,987 3,796 4,708 14,878 9,211 2,696

12,789 1,859 4,027 5,065 13,636 1,606 2,864

11,757 1,456 5,397 1,016 11,029 1,326 2,696

184,298

140,490

41,846

34,677

FALLING DUE AFTER MORE THAN ONE YEAR

Group

Bank loans Hire purchase creditors

2003 £000

2004 £000

2003 £000

43,695 5

33,080 23

33,732 -

18,021 -

43,700

33,103

33,732

18,021

17. BORROWINGS

Unsecured bank loans variable with London Interbank rate Bank overdrafts Hire purchase creditors

Less: Amounts falling due within one year Amounts falling due after more than one year

Company

2004 £000

Group

Company

2004 £000

2003 £000

2004 £000

2003 £000

60,169 168

47,112 12,156 49

46,521 -

29,778 -

60,337 (16,637)

59,317 (26,214)

46,521 (12,789)

29,778 (11,757)

43,700

33,103

33,732

18,021

Interest rate information is disclosed in note 24. The Company is jointly and severally liable under cross guarantees within the Group for bank loans and overdrafts which amounted to £13,648,000 (2003: £29,490,000). Group

Bank loans and overdraft repayable: less than one year more than one and not more than two years more than two and not more than five years five years or more

Company

2004 £000

2003 £000

2004 £000

2003 £000

16,474 13,161 30,038 496

14,032 9,063 14,945 9,072

12,789 9,476 23,760 496

11,757 6,789 8,750 2,482

60,169

47,112

46,521

29,778

Of this amount £60,169,000 (2003: £42,112,000) is repayable in increasing instalments commencing up until 2010 (2003: 2007). The remainder had no fixed repayment terms. £5,000 of hire purchase creditors are repayable between one and two years (2003: £19,000) and £nil between two and five years (2003: £4,000).

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

45

NOTES

TO

THE

F I N A N C I A L S TAT E M E N T S

for the year ended 31 December 2004 (continued)

18. PROVISIONS

FOR LIABILITIES AND CHARGES

Dilapidations

Closure

Deferred Tax

Total

Group

£000

£000

£000

£000

As at 1 January 2004 On acquisition (note 10) Charged/(credited) to profit and loss account (Note 4)

800 -

2,750

1,424 48 (1,337)

1,424 848 1,413

As at 31 December 2004

800

2,750

135

3,685

Company As at 1 January 2004 Charged to profit and loss account

-

-

102 88

102 88

As at 31 December 2004

-

-

190

190

The amounts of deferred taxation provided are as follows: 2004

Capital allowances in excess of depreciation Short-term timing differences

2003

Group £000

Company £000

Group £000

Company £000

683 (548)

(114) 304

1,268 156

(114) 216

135

190

1,424

102

No deferred tax has been provided in relation to capital gains where the properties have been revalued at above original cost, in view of the replacement or continuing use of these assets in the Group’s business. 19. SHARE

CAPITAL

Group and Company Authorised 54,000,000 ordinary shares of 25p each

2004 £000

2003 £000

13,500

13,500

13,500

13,500

Allotted, called up and fully paid Ordinary shares of 25p each At 1 January - (35,016,959 shares) Allotted under share option schemes (260,460 shares) Allotted on scrip issue (76,713 shares) Allotted on acquisition of JN Holdings Limited

8,754 65 19 -

8,581 66 107

At 31 December - (35,354,132 shares)

8,838

8,754

As at 31 December 2004, options for the Directors and employees to subscribe for a total of 139,645 (2003: 435,124) ordinary shares were outstanding from the Company and Executive share option schemes. These options are exercisable at various dates from now up to 25 September 2011 at prices between 82.5p per share and 124.0p per share.

46

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

NOTES

TO

THE

F I N A N C I A L S TAT E M E N T S for the year ended 31 December 2004 (continued)

20. RESERVES

Group £000

Company £000

Share premium: As at 1 January 2004 Arising on issue of new Ordinary shares

1,114 465

1,114 465

As at 31 December 2004

1,579

1,579

Revaluation reserve: As at 1 January 2004 Transfer on disposal of revalued assets Transfer of amount equivalent to additional depreciation on revalued assets

7,407 (717) (1)

-

As at 31 December 2004

6,689

-

14,591

14,591

Group £000

Company £000

Profit and loss account: As at 1 January 2004 Retained profit for the year Transfer from revaluation reserve

38,721 14,569 718

36,721 13,660 -

As at 31 December 2004

54,008

50,381

Total reserves: As at 31 December 2004

76,867

66,551

As at 31 December 2003

61,833

52,426

2004 £000

2003 £000

Profit for the financial year Dividends Issue of shares Redemption of preference shares

18,844 (4,275) 549 -

10,463 (3,893) 982 (13,889)

Net addition/(reduction) to shareholders’ funds Opening equity shareholders’ funds

15,118 70,587

(6,337) 76,924

Closing equity shareholders’ funds

85,705

70,587

Capital redemption reserve: As at 1 January 2004 and 31 December 2004

21. R ECONCILIATION

OF MOVEMENT IN EQUITY SHAREHOLDERS ’ FUNDS

Group

22. C ASH FLOW (a) Outflow related to non-operating exceptional items. This comprises expenditure relating to the sale and closure of operations, including redundancy and other employee costs, stock clearance and contract terminations. 2004 £000

2003 £000

14,637 (12,967)

(8,399) (17,832)

Movement in net debt in the year Loans acquired Hire purchase finance acquired (note 10) Net debt at 1 January

1,670 (209) (59,284)

(26,231) (3,460) (29,593)

Net debt at 31 December

(57,823)

(59,284)

(b) Reconciliation of net cash flow to movement in net debt Increase/(decrease) in cash in the year Cash outflow from decrease in debt and hire purchase financing

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

47

NOTES

TO

THE

F I N A N C I A L S TAT E M E N T S

for the year ended 31 December 2004 (continued)

22. C ASH

FLOW (continued)

(c) Analysis of net debt At 1 January 2004 £000

Acquisitions £000

Other non-cash changes £000

At 31 December 2004 £000

Cash flow £000

Cash at bank and in hand Overdrafts

33 (12,156)

2,481 12,156

-

-

2,514 -

Debt due after one year Debt due within one year Hire purchase creditors

(12,123) (33,080) (14,032) (49)

14,637 (14,173) 1,116 90

(209)

3,558 (3,558) -

2,514 (43,695) (16,474) (168)

(59,284)

1,670

(209)

-

(57,823)

23. RELATED PARTY TRANSACTIONS Hamilton Finance Limited (a wholly owned subsidiary of General Electric Capital Corporation) owns 24.2% of the issued ordinary share capital of the Company. GE Capital and its subsidiaries are therefore considered to be related parties in accordance with the definition included in FRS 8. During the year the Group entered into a number of transactions with the related party, details of which are summarised below. General Electric Capital Corporation and its subsidiary companies have been given the opportunity to provide, on normal competitive terms, advances on hire purchase to customers of the Group. This agreement expires on 31 December 2005. During the year, the Group received £4,133,395 (2003: £2,577,000) commission income under this agreement. The amount outstanding at the year end was £165,000 (2003: £339,000). In addition, the Group holds advances from GE Capital in relation to future hire purchase agreements that the Group expects to arrange for GE Capital. At the year end the balance included in other creditors was £7,328,000 (2003: £9,881,000). The Group has paid £25,000 (2003: £22,000) for consultancy services provided by Consult for Success, of which G. J. Morris is a Director. 24. DERIVATIVES AND FINANCIAL INSTRUMENTS The objectives, policies and strategies for holding or issuing financial instruments adopted by the Board are given in the Directors’ Report. Further details regarding financial liabilities at 31 December 2004 and 31 December 2003 are given below. Short term debtors and creditors, which include liabilities in respect of interest-bearing consignment stock, have been excluded from all disclosures. All activities are in Sterling and therefore there is no exposure to foreign currency risk. MATURITY PROFILE The maturity profile of financial liabilities is shown in notes 16 and 17. The Group had the following committed undrawn borrowing facilities which expire:

In less than one year

2004 £000

2003 £000

53,250

28,344

The above facilities represent loans and overdrafts which are repayable on demand, but for which the facilities have been confirmed. INTEREST RATE PROFILE Financial assets comprise cash of £2,514,000 (2003: £33,000). An analysis of liabilities and after taking account of swaps is given below. 2004 Financial Liabilities £000

2003 Financial Liabilities £000

Fixed Rate Floating Rate

1,964 58,373

3,071 56,246

Total

60,337

59,317

The weighted average interest rate of the fixed rate financial liabilities at 31 December 2004 was 5.84% (2003: 4.80%). The weighted average period for which interest rates on such liabilities were fixed was three months at 31 December 2004 (2003: 3 months). Interest rates on floating rate liabilities are based on London Interbank rate.

48

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

NOTES

TO

THE

F I N A N C I A L S TAT E M E N T S for the year ended 31 December 2004 (continued)

24. DERIVATIVES AND FINANCIAL INSTRUMENTS (continued) FAIR VALUES Based on current interest rates, the fair value of the Group’s interest rate swap is a liability of approximately £12,000 (2003 liability: £37,000). Fair values shown have been calculated by discounting cash flows at prevailing interest rates. In addition to the interest rate swap reflected above, the Group has a £11,892,000 notional principal Sterling interest rate collar, which reduces over time between the balance sheet date and 27 December 2006. The collar has a floor of 3.94% and a cap of 6.79%. Additionally, the Group has a £5,500,000 notional principal Sterling window swap which reduces over time between the balance sheet date and 3 August 2007. This takes effect if interest rates fall below 3.94% by reducing the floor of the collar to 3.25% and the cap to 6%. The fair value of the interest rate collar is £29,800 (2003: £66,500). The Directors believe that there is no material difference between the carrying value and the fair value of other financial assets and liabilities. 25. P ENSIONS PENSION SCHEMES The Group participated in the Lookers Pension Plan which is a defined benefit scheme providing benefits based on final pensionable salary. “The Lookers Pension Plan”, which is a funded scheme, is administered by William M. Mercer Limited. The scheme has been registered with the Registrar of Pensions. The assets of the scheme are held separately from those of the Group, being held in separate funds by the Trustees of the Lookers Pension Plan. The most recent full actuarial valuation of the Lookers Pension Plan was carried out as at 6 April 2002, by William M. Mercer Limited using the projected unit method. The assumptions which have the most significant effect on the results of the valuation are those relating to the rate of return on investments and the rate of increase in salaries. It was assumed that the investment return would be 2% p.a. higher than the increase in salaries in the period up to retirement. No allowance was made for any future discretionary increases in benefits. This actuarial valuation showed that the market value of the scheme’s assets attributable to the Lookers Group was £48,000,000 and that the actuarial value of the assets represented 93% of the liabilities at the valuation date, after allowing for expected future increases in earnings. The valuation does not take into account any impact of fluctuations in general stock market values since 6 April 2002. During the year the pension valuation was updated and certain assumptions were amended to reflect the Directors’ best estimates of the future Group pension cost. In particular the rate of equity investment return was increased by 1% and the rate of salary increases was re-aligned to management’s current best estimates. The employer’s future service contribution rate has been adjusted to take into account the deficit disclosed by the valuation, spread over the average remaining service lives of the members of the scheme. The agreed contribution rate for the year ended 31 December 2004 was 16.5%. The agreed contribution rate for next year is 16.5%. The Group and Company provides pension arrangements for certain Directors under defined contribution schemes. The Group has recently introduced a defined contribution Stakeholder Pension Scheme for employees. The profit and loss account charge for the year in respect of defined contribution schemes was £242,000 (2003: £113,000). The pension charge for the scheme for 2004 was £428,000 (2003: £905,000). At the year end there was a pension prepayment of £2,266,000 (2003: £1,069,000). COMPANY The Company participates in the Lookers Pension Plan, a Group wide defined benefit scheme which is accounted for under SSAP 24. The Company’s share of the underlying assets and liabilities cannot be identified on a consistent and reasonable basis and accordingly, under FRS 17, the Company will account for contributions to the scheme as if it were a defined contribution scheme. Information in respect of the scheme as a whole is set out above. FRS 17 RETIREMENT BENEFITS In November 2000 the Accounting Standards Board issued FRS 17 “Retirement Benefits” replacing SSAP 24 “Accounting for Pension Costs”. FRS 17 is anticipated to be fully effective for periods ending on or after 1 January 2005, though certain disclosures are required during the transition period. The transitional disclosures for periods ending on or after 22 June 2001 are detailed in the next table. A valuation update was made as at 31 December 2004 by a qualified independent actuary to take account of the FRS 17 requirements. Scheme liabilities have been calculated using a consistent projected unit valuation method and compared to the scheme’s assets at their 31 December market value. The major assumptions used by the actuary were:

Rate of increase in salaries (excluding promotional salary scale) Rate of increase of pensions in payment Discount rate Inflation assumption

2004

2003

2002

3.4% 2.8% 5.6% 2.8%

3.7% 2.7% 5.9% 2.7%

3.2% 2.2% 5.9% 2.2%

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

49

NOTES

TO

THE

F I N A N C I A L S TAT E M E N T S

for the year ended 31 December 2004 (continued)

25. P ENSIONS (continued) Based on actuarial advice and using the above assumptions in calculating the schemes’ liabilities, the total value of these liabilities under FRS 17 are £64,229,000 at 31 December 2004 (2003: £57,297,000). The fair value of assets of the scheme and the expected rates of return on each class of assets are:

Equities Bonds Cash

Expected rate of return 2004

Market value 2004 £000

Expected rate of return 2003

Market value 2003 £000

Expected rate of return 2002

Market value 2002 £000

7.9% 4.5% 4.0%

33,069 14,170 66

7.9% 4.7% 4.0%

29,613 13,671 393

6.5% 4.5% -

27,629 13,163 -

Total fair value of assets

47,305

43,677

40,792

The overall net deficit between the assets of the Group’s defined benefit scheme and the actuarial liabilities of the scheme which would be included in the accounts, under FRS 17, are as follows: 2004 £000

2003 £000

Fair value of scheme’s assets Actuarial value of scheme liabilities

47,305 (65,356)

43,677 (57,297)

Deficit in the scheme Related deferred tax asset

(18,051) 5,415

(13,620) 4,086

Net pension liability

(12,636)

(9,534)

The inclusion of these liabilities within the Group balance sheet would have the following effect on the Group profit and loss account reserve and net asset position: 2004 £000

2003 £000

54,008 (1,586)

38,721 (748)

52,422 (12,636)

37,973 (9,534)

39,786

28,439

2004 £000

2003 £000

85,705 (1,586)

75,587 (748)

84,119 (12,636)

74,839 (9,534)

71,483

65,305

2004 £000

2003 £000

Service cost Past service cost Curtailment gain

1,428 (301)

1,542 -

Total operating charge

1,127

1,542

Profit and loss account as reported Write off of SSAP 24 prepayment net of deferred tax Profit and loss account on FRS 17 basis excluding net pension liability Net pension liability Profit and loss account on FRS 17 basis

Net assets as reported Write off of SSAP 24 prepayment net of deferred tax Net assets on FRS 17 basis excluding net pension liability Net pension liability Net assets on FRS 17 basis

ANALYSIS OF THE AMOUNT CHARGED

50

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

TO

OPERATING PROFIT

NOTES

TO

THE

F I N A N C I A L S TAT E M E N T S for the year ended 31 December 2004 (continued)

25. P ENSIONS (continued) 2004 £000

2003 £000

2,961 (3,350)

2,307 (3,035)

(389)

(728)

2004 £000

2003 £000

Actual return less expected return on assets Experience gains and losses on liabilities Changes in assumptions

1,885 (6,483)

3,657 (4,781)

Net actuarial loss recognised in STRGL

(4,598)

(1,124)

2004 £000

2003 £000

Deficit in scheme at 1 January 2004 Movement in the period: Current service cost Contributions Curtailment gain Other finance income Actuarial loss

(13,620)

(11,912)

(1,428) 1,683 301 (389) (4,598)

(1,542) 1,686 (728) (1,124)

Deficit in scheme at 31 December 2004

(18,051)

(13,620)

2004

2003

2002

1,885 4%

3,857 8%

(8,799) 22%

-

-

(4,818) (9%)

(4,598) (7%)

(1,124) (2%)

(7,795) (15%)

ANALYSIS OF NET EXPENSE

ON

PENSION SCHEME

Expected return on pension scheme assets Interest on pension liabilities Net expense

ANALYSIS OF AMOUNT RECOGNISED IN STATEMENT

MOVEMENT

HISTORY

OF

OF

TOTAL RECOGNISED GAINS

AND

LOSSES

IN DEFICIT DURING THE PERIOD

EXPERIENCE GAINS

AND

LOSSES

Difference between expected and actual return on scheme assets: Amount (£000) Percentage of scheme assets Experience gains and losses on scheme liabilities: Amount (£000) Percentage of scheme liabilities Total amount recognised in statement of total recognised gains and losses: Amount (£000) Percentage of scheme liabilities

26. L EASE C OMMITMENTS Annual commitments under non-cancellable operating leases expiring: Within one year Within two to five years After five years

Property £000

2004 Plant & equipment £000

2003 Property £000

Plant & equipment £000

301 830 2,136

685 723 56

440 405 950

445 108 28

3,267

1,464

1,795

581

27. CONTINGENT GAIN Additional amounts may be receivable from HM Customs and Excise in respect of over payments of VAT in previous years. These will not be recognised until they have been received.

28. POST BALANCE SHEET EVENT On 31 January 2005 the Group announced the acquisition of the trading name and assets of Bristol Trade Centre, a leading used car supermarket, for a cash consideration of approximately £8.5m.

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

51

TRADING OUTLETS AND INTERESTS M A J O R S U B S I D I A RY C O M PA N I E S

IN

as at 31 December 2004

M OTOR D IVISION /F RANCHISES Vauxhall Birkenhead Blackburn Chester Ellesmere Port Heswall Lisburn Liverpool Portadown Selly Oak Speke St. Helens Star Park South Wallasey Yardley Volkswagen Blackburn Burnley Darlington Middlesbrough Northallerton

A GRICULTURAL D IVISION Darley Dale Tuxford

Ferrari Belfast

FPS Barking Birmingham Bristol Cardiff Charlton Colchester Glasgow Leeds Leicester Liverpool Luton Maidstone Manchester Newcastle Preston Reading Sheffield Southampton Staples Corner

Lexus Belfast Hadleigh

M AJOR S UBSIDIARY C OMPANIES DSM Autos Limited Bolling Investments Limited Charles Hurst Limited Charles Hurst Motors Limited Lookers North West Limited Lookers Southern Limited Lookers Birmingham Limited FPS Distribution Limited

Maserati Belfast

Website: www.lookers.co.uk

Bentley Belfast Saab Chester Liverpool

Toyota Belfast Chelmsford Dundonald Newtownabbey Rayleigh Romford

FINANCIAL STATEMENTS

L UXURY /S PECIALIST F RANCHISES Aston Martin Belfast

Land Rover Belfast Bishop’s Stortford Chelmsford Hadleigh

Renault Altrincham Bangor Belfast Chelmsford Chester Colchester Lisburn Macclesfield Newtownabbey Newtownards Northwich Southend Stockport

&

MG Rover Belfast Coleraine Motherwell Stockport

Honda Derby Liverpool Mapperley Nottingham Southport Warrington

Citroën Belfast

Volvo Hadleigh Witham

2004

M OTORCYCLES Belfast - Yamaha Newtownabbey - BMW T YRES Belfast - Boucher Road Belfast - Sydenham Road Coleraine Dundonald Omagh Portadown

Chrysler / Jeep Belfast Lisburn

Peugeot Belfast Knock

LOOKERS PLC REPORT

Mazda Motherwell

Jaguar Belfast Glasgow Motherwell Portadown

Nissan Belfast Camden Dundonald Mill Hill Newtownabbey Waltham Abbey

52

Seat Stockport

FIVE YEAR RECORD for the year ended 31 December 2004

Year ended 31 December 2000 £000

Year ended 31 December 2001 £000

Year ended 31 December 2002 £000

Year ended 31 December 2003 £000

Year ended 31 December 2004 £000

582,529

717,894

790,352

961,445

1,093,752

6,510 (1,820)

10,065 (2,507)

11,829 (3,007)

14,025 (3,562)

26,545 (7,701)

Profit attributable to shareholders

4,690

7,558

8,822

10,463

18,844

Non-equity dividends Equity dividends

1,152 2,928

1,152 3,183

1,126 3,428

3,893

4,275

Total dividends

4,080

4,335

4,554

3,893

4,275

EARNINGS

10.5p

18.9p

22.6p

30.1p

53.6p

23,058 23,020 24,232

23,061 22,980 26,901

22,470 8,135 46,319

8,754 23,112 38,721

8,838 22,859 54,008

70,310

72,942

76,924

70,587

85,705

TURNOVER PROFIT BEFORE Taxation

AS

AT

TAXATION

PER ORDINARY SHARE

PERIOD

END

Shareholders’ interests Share capital Reserves – non-distributable – distributable

Figures for 2001 differ from those originally reported due to amendment following the introduction of Financial Reporting Standard 19 - Deferred Tax.

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

53

NOTICE

OF

MEETING

Incorporated in England under the Companies Act 1985 Registered No. 111876 NOTICE IS HEREBY GIVEN that the ninety-fifth Annual General Meeting of Lookers plc (“the Company”) will be held at the Trafford suite, Manchester United Football Club, Sir Matt Busby Way, Old Trafford, Manchester, M16 0RA on Thursday 12 May 2005 at 12 noon for the following purposes: 1. To approve and adopt the financial statements for the year ended 31 December 2004 together with the reports thereon of the Directors and Auditors (Resolution 1). 2. To receive and approve the Directors’ Remuneration Report for the year ended 31 December 2004 (Resolution 2). 3. To declare a final dividend of 8.1p per share on the ordinary share capital of the Company (Resolution 3). 4. To re-elect F. S. Maguire as a Director who retires in accordance with the Articles of Association (Resolution 4). 5. To re-elect N. Clyne as a Director who retires in accordance with the Articles of Association (Resolution 5). 6. To re-appoint PricewaterhouseCoopers LLP as Auditors (Resolution 6). 7. To authorise the Directors to fix the remuneration of the Auditors (Resolution 7). 8. To authorise the Directors to generally and unconditionally in accordance with section 80 Companies Act 1985 to exercise all the powers of the Company to allot relevant securities (within the meaning of the said Section 80) up to an aggregate nominal amount of £2,981,089 (11,924,356 shares) during the period commencing on the date of the passing of this Resolution and expiring on the date of the next Annual General Meeting of the Company but so that this authority shall allow the Company to make, before the expiry of this authority offers or agreements which would or might require relevant securities to be allotted after such expiry and, notwithstanding such expiry, the Directors may allot relevant securities in pursuance of such offers or agreements (Resolution 8). 9. A Special Resolution, to empower the Directors to allot equity securities (as defined for the purposes of Section 95 of the Companies Act 1985 (“the Act”)) pursuant to Section 80 of the Act, as if Section 89(1) of the Act did not apply to any such allotment provided that this power shall be limited: (i) to the allotment of equity securities in connection with any rights issue in favour of holders of ordinary shares in the capital of the Company on the register of members at such record date or dates as the Directors may determine for the purposes of the issue where the equity securities respectively attributable to the interests of all such shareholders are proportionate (as nearly as may be) to the respective number of ordinary shares in the capital of the Company held by the ordinary shareholders, and for the avoidance of doubt, the Directors may make such exclusions or other arrangements as the Directors may deem necessary or expedient to deal with fractional entitlements or legal or practical problems under the laws of overseas jurisdictions or the requirements of any regulatory body; and (ii) to the allotment (otherwise than pursuant to sub-paragraph (i) above) of equity securities having an aggregate maximum nominal amount of £441,927 (1,767,708 shares) in the case of ordinary shares. and this power shall expire on the date of the next Annual General Meeting of the Company after the passing of this Resolution save that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such offer or agreement as if the power conferred hereby had not expired (Resolution 9).

54

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

NOTICE

MEETING

OF

(continued)

10. As a Special Resolution, to authorise the Company both generally and unconditionally to make market purchases (within the meaning of Section 163 of the Companies Act 1985) of ordinary shares of 25p each in the capital of the Company provided that: (i) the aggregate maximum Nominal Value of ordinary shares hereby authorised to be purchased is £883,853 (3,535,412 shares); (ii) the minimum price which may be paid for ordinary shares is 25p per ordinary share; (iii) the maximum price which may be paid for ordinary shares is an amount equal to 105% of the average of the middle market quotations for an ordinary share as derived from the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which the ordinary share is purchased; (iv) the authority hereby conveyed shall expire at the conclusion of the next Annual General Meeting of the Company, unless such authority is renewed prior to such time; and (v) the Company may make a contract to purchase ordinary shares under the authority hereby conveyed prior to the expiry of such authority which will or may be executed wholly or partly after the expiry of such authority, and may make a purchase of ordinary shares in pursuance of any such contract (Resolution 10). 11. That pursuant to Article 102 of Articles of Association of the Company the maximum aggregate annual sum payable to Directors by way of fees for their services as Directors be increased from £200,000 to £300,000 per annum (Resolution 11). Registered Office: 776 Chester Road Stretford Manchester M32 0QH

By order of the Board D. J. Blakeman, Secretary 21 March 2005

Notes: 1. The company specifies (pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001) that ordinary shareholders registered in the Company’s register, as at 6.00pm on 10 May 2005 are entitled to attend and speak at the Meeting and to vote on all resolutions proposed at the Meeting. We will disregard any entries on the register after this time in determining who is entitled to attend and vote. 2. A member entitled to attend, speak and vote at the Meeting is entitled to appoint a proxy to attend, speak and, upon a poll, vote in his/her stead. A member may nominate a proxy of his/her choice who need not be a member of the Company. 3. Appointment of a proxy will not preclude a member from, attending, speaking and voting at the Meeting should he/she subsequently wish to do so. 4. A form of proxy is enclosed on page 57 for use by shareholders in respect of Resolutions 1 to 11. 5. A form of proxy must be lodged with the Company’s Registrars, Capita Registrars’ Proxy Department, P.O. Box 25 Beckenham, Kent B73 4BR, not less than 48 hours before the time appointed for the holding of the Annual General Meeting or any adjourned Meeting. The following information is available for inspection on any weekday (except Saturday) during usual business hours at the Registered Office of the Company and will, on the date of the Annual General Meeting be available for inspection from 11.45am until the conclusion of that Meeting: (a) A statement of transactions of Directors (and their family interests) in the Capital of the Company. (b) The Memorandum and Articles of Association of the Company.

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

55

SHAREHOLDERS’ I N F O R M AT I O N

BANKERS AND PROFESSIONAL ADVISERS

D IVIDEND T IMETABLE Ordinary: Interim - end of November Final - end of May The Annual General Meeting is normally held in mid-May each year.

P RINCIPAL B ANKERS National Australia Bank Barclays Bank PLC The Royal Bank of Scotland plc Lloyds TSB Bank of Ireland HSBC Bank plc

S HARE Q UOTES Share prices of the ordinary shares are shown in the Financial Times and also appear in several other newspapers. The ordinary share price is also shown daily on Teletext (BBC 1 page 227 and Channel 4, page 524).

R EGISTRARS AND T RANSFER O FFICE Capita Registrars. Woodsome Park, Fenay Bridge Huddersfield HD8 0LA

Up to the minute Lookers ordinary share price can be obtained by calling the Financial Times City Line on 0906 8433218 (calls from within the UK cost 60p per minute).

A UDITORS PricewaterhouseCoopers LLP 101 Barbirolli Square Lower Mosley Street Manchester M2 3PW

S HAREHOLDER B ENEFITS We operate a scheme which provides all registered private shareholders holding a minimum of 1,000 ordinary shares with an additional £100 discount off the price of any new motor vehicle purchased from any of the Group’s garages. The private registered shareholder negotiates their purchase of the new car in the normal way and the £100 is an additional discount obtained from the Company Secretary.

S OLICITORS Addleshaw Goddard 100 Barbirolli Square, Manchester M2 3AB S TOCK B ROKERS Numis Securities Limited Cheapside House 138 Cheapside London EC2V 6LH F INANCIAL A DVISERS Rothschilds 82 King Street, Manchester M2 4WQ

56

LOOKERS PLC REPORT

&

FINANCIAL STATEMENTS

2004

FORM

OF

PROXY

TO BE RETURNED BY ORDINARY SHAREHOLDERS ONLY For use at the Annual General Meeting to be held at 12.00 noon on Thursday 12 May 2005. I/we (block capitals) .................................................................................................................................................................... of .............................................................................................................................................................................................. being (a) member(s) of the above-named Company hereby appoint Henry Kenneth Surgenor or failing him David Victor Dyson (both Directors of the Company) or failing him .................................................................................................................................................................................................. of .............................................................................................................................................................................................. as my/our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held on 12 May 2005, and at any adjournment thereof. I/we direct that my/our vote(s) attaching to my/our............... ordinary shares be cast on the resolutions referred to in the Notice of Meeting as indicated by an X as shown below:

RESOLUTIONS

For

Against

1. Adoption of Financial Statements, Directors and Auditor’s Reports 2. Approval of Directors’ Remuneration Report 3. Approval of Final dividend 4. Re-election of F. S. Maguire 5. Re-election of N. Clyne 6. Re-appointment of PricewaterhouseCoopers LLP 7. Authorisation of Directors to fix Auditors’ Remuneration 8. Authorise Directors to allot up to 11,924,355 ordinary shares under Section 80 of the Companies Act 1985 9. As a Special Resolution to authorise the Directors to allot up to 1,767,708 ordinary shares as if Section 89(1) of the Companies Act 1985 did not apply to such allotment. 10. As a Special Resolution to authorise the purchase of 3,535,412 ordinary shares under Section 163 of the Companies Act 1985 11. To increase the maximum amount payable for Directors fees

Dated..................................................................day of.....................................................................................2005 Name (block capitals) ................................................................................................................................................................. Signed ...................................................................................................................................................................................... Notes 1. Only Shareholders on the Company’s register at 6.00pm on 10 May 2005 are entitled to attend and speak at the Meeting and to vote on all resolutions proposed at the Meeting. 2. A member entitled to attend, speak and vote at the Meeting is entitled to appoint a proxy to attend, speak and, upon a poll, vote in his/her stead. A member may nominate a proxy of his/her choice who need not be a member of the Company. 3. Appointment of a proxy will not preclude a member from, attending, speaking and voting at the Meeting should he/she subsequently wish to do so. 4. In the case of a corporation, this proxy must be under its common seal, or under the hand of an officer or attorney duly authorised in writing. 5. In the case of joint holders, the proxy of the first-named holder on the register of members will be accepted to the exclusion of the votes of the other joint holders. 6. A proxy to be valid must be lodged with the Company’s Registrars, Capita Registrars, Proxy Department, P.O. Box 25 Beckenham, Kent B73 4BR, not less than 48 hours before the time fixed for the Meeting. 7. If the Form of Proxy is returned without an indication as to how the proxy shall vote on any particular matter, the proxy will exercise his/her discretion as to whether he/she votes and if so, how. The person appointed as proxy may also vote as he or she sees fit on any other business (including amendment to a resolution) which may properly come before the Meeting. 8. You are entitled to appoint a proxy of your own choice. To appoint someone other than Henry Kenneth Surgenor or David Victor Dyson as your proxy, cross out Henry Kenneth Surgenor, or failing him, David Victor Dyson, and write on the dotted line the full name and address of your proxy. The change should be initialled. 9. Any alteration made to this Form of Proxy must be initialled.

THIRD FOLD AND TUCK IN

BUSINESS REPLY SERVICE Licence No. MB122

1

FIRST FOLD

Capita Registrars Lookers plc Proxy Department PO Box 25 Beckenham Kent B73 4BR

SECOND FOLD