BCA Marketplace plc Marketplace BCA UNIQUELY POSITIONED PROVIDING SOLUTIONS
Annual Report and Accounts 2018 Accounts and Report Annual
BCA Marketplace plc Annual Report and Accounts 2018 BCA operates across every link of the Strategic report page 01 01 Business highlights post-factory automotive value chain, 02 Executive Chairman’s statement 04 BCA at a glance providing physical and digital solutions 06 Our business today 08 Market overview 14 Strategy and value at scale to our customers. 17 Group operating review 24 Divisional reviews 42 Risk management Once a new vehicle leaves its place of manufacture, we provide 46 Corporate responsibility a comprehensive range of services including single and bulk vehicle collections and deliveries, inspection checks, customs Governance page 51 management, storage, refurbishment, vehicle preparation, 52 Board of Directors finance, pricing data and used vehicle buying. Our digital 54 Executive Chairman’s governance statement and physical auction platforms bring together OEMs, leasing 55 Governance report companies, fleet operators, retail dealers and buyers to efficiently 57 Nomination Committee report transfer the ownership of vehicles while protecting value. 58 Remuneration Committee report 65 Audit and Risk Committee report 67 Viability statement We are a key facilitator and link to the entire value chain in 68 Directors’ report 71 Independent auditor’s report automotive, whether that is the manufacturer, the dealer, the vehicle financier or the end consumer. BCA facilitates the UK and European vehicle market, enabling vehicles to be moved, Financials page 77 bought and sold, thereby providing liquidity and choice. 78 Primary statements 84 Notes to the accounts 94 Results for the year 101 Working capital and provisions 106 Long-term assets BCA Marketplace plc, (‘BCA’, ‘the Group’, or ‘the Company’) is a constituent of the UK’s 110 Capital structure and financing FTSE 250 and our shares are traded on the London Stock Exchange (LON: BCA). 114 Pensions and other information 125 Company accounts The Strategic report, which has been prepared in accordance with the requirements of the Companies Act 2006, comprises the first ten sections and has been approved and signed on behalf of the Board. The Directors’ report comprises pages 68, 69 and 70 of the Annual Report.
What makes us number one in our chosen markets
Robust record of Unmatched scale financial performance
Uniquely positioned Experienced to offer integrated, management end-to-end services
Resilient Excellent business model customer service Strategic report Governance Financials
BUSINESS HIGHLIGHTS 4 million Vehicles physically touched by BCA annually
Operational highlights Financial highlights
• Over one million vehicles sold in UK Vehicle Remarketing, up 6.5% • Growth of 23.0% in International £159.5m £87.6m cross border sales Adjusted EBITDA* (£m) Operating profit (£m) • Double digit volume growth for the sixth consecutive year in 159.5 87.6 135.6 +17.6% 74.3 +17.9% WeBuyAnyCar driven by increased 98.5 16.3 repeat customers and consumer trust in the brand 2016 2017 2018 2016 2017 2018 • Increased remarketing capacity through the opening of the expanded Manchester and Bedford site developments • Automotive Services commenced 7.0p 11.4p operations at Southampton Port Earnings per share (diluted) Earnings per share (adjusted diluted)* for the Renault-Nissan-Mitsubishi Alliance 7.0 +37.3% 11.4 +25.3% 5.1 9.1 • Increased BCA Automotive 1.2 7.0 delivery of UK Remarketing arranged transport – now 46% 2016 2017 2018 2016 2017 2018 up from 26% in 2017 • Acquisition of the 49% minority * Adjusted measures are defined on page 17. interest in AutosOnShow for £4.0m 8.55p Dividend (pence per share) 8.55 +26.7% 6.00 6.75
2016 2017 2018
1,018,000 362,000 219,000 Vehicles sold by Vehicles sold by Vehicles sold by UK Vehicle Remarketing International Vehicle Remarketing WeBuyAnyCar
900 900 330 330 170 170
800 1,000 800 1,000 300 360 300 360 140 200 140 200
‘000 ‘000 ‘000 ‘000 ‘000 ‘000 2017 2018 2017 2018 2017 2018 956 1,018 347 362 194 219
BCA Marketplace plc Annual Report and Accounts 2018 1 EXECUTIVE CHAIRMAN’S STATEMENT Together for Growth
The Group provides comprehensive vehicle management services to OEMs and Dear Stakeholder fleet owners, and facilitates efficient changes in ownership between all types The Group has delivered record commercial of vendors and buyers throughout a vehicle’s typical 12-15 year life span. and financial results for the third successive year. We saw increased volumes across all divisions, with UK Vehicle Remarketing achieving the landmark of selling over one million vehicles in the year. Adjusted EBITDA increased by 17.6% to £159.5m while adjusted diluted earnings per share has increased to 11.4p, up 25.3% (compared to 9.1p in 2017). Operating profit has increased by £13.3m to £87.6m, an increase of 17.9%, reflecting the growth in adjusted EBITDA offset by non-recurring restructuring costs relating to simplification of management structures.
The automotive sector remains dynamic and continues to evolve in terms of market participants, vehicle preferences and ownership models. The transparency and liquidity that auction provides continues to attract greater numbers of vehicles as first life ownership concentration increases. With up to 200,000 customer vehicles on our sites at any one time we have the physical capacity to support the post-manufacture lifecycle today. BCA has a history of “BCA is performing strongly, using our innovation and providing solutions at infrastructure and range of capabilities to scale to the automotive industry. BCA first conducted online auctions 22 years ago and provide solutions to our automotive customers. online sales now represent 41.8% of our We continue to deliver integrated efficiencies, total volume. Our logistics, fleet care, fleet management and storage solutions combine supporting the Group’s cash generation and leading inspection and imaging technology underpinning our dividend” with inventory management capabilities. Over the last year we have enhanced our Avril Palmer-Baunack digital and data leadership team through a Executive Chairman number of appointments. Our agile product capabilities are bringing new customer focused developments such as our Buyer app and Dealer app (see page 13) to further simplify and improve the efficiency of changes in vehicle ownership.
BCA core values The Group’s business objectives include Honesty & integrity Our customers Can-do attitude operating to high standards of ethical behaviour. To support those objectives, we aim for excellence in what we do through the application of the following core values:
We are honest and Our customers are at the We are open for business act with integrity heart of our business with a ‘can-do’ attitude
2 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Our customers are at the heart of our to give back to the community and support business as we provide physical and digital fun challenges for charity. You can read solutions designed to meet their needs. more about our commitments and actions UK Vehicle Remarketing won Car Dealers’ across these areas in our Corporate Power 2017 Auction House of the Year, Responsibility section on pages 46 to 50. 6.5% our data science team won a BusinessCar’s Volume growth in the UK Techies Award and our 800+ truck fleet was Dividend voted carrier of the year at the Automotive The Board is pleased to recommend Global awards. In WeBuyAnyCar, we payment of an increased final dividend of continue to see new and repeat customers 5.95p per share. If approved at the Annual adopting this growing channel. Throughout General Meeting to be held on Thursday this Annual Report are case studies which 6 September 2018, this will be paid on 4.3% illustrate the strength of our relationships 28 September 2018 to those shareholders Volume growth in Europe and highlight some of the products and on the Register at the close of business services that allow us to serve effectively. on 14 September 2018. The shares will become ex-dividend on 13 September 2018. Corporate Our good cash generation and increased BCA received approval from the UK Listing dividend demonstrate the robustness Authority on 16 October 2017 to transfer of the growth delivered. 12.9% the listing category of its Ordinary shares Volume growth in WeBuyAnyCar to a Premium Listing. Subsequently on An interim dividend of 2.60p per share was 18 December 2017 the shares qualified for paid on 31 January 2018. Including this, the inclusion in the FTSE 250, FTSE 350 and total dividend for the year is 8.55p per share FTSE All-Share Indices, enhancing liquidity compared to a total of 6.75p per share last to our shareholders. The steps we took to year, an increase of 26.7%. codify our existing policies and the changes made to the Board Committees through the Outlook Premium Listing process are set out in the The new financial year has started well, Governance section of this report on pages with performance since the year end in 51 to 76. line with our expectations. Across all of our markets there remains significant I would like to take this opportunity to thank addressable volume to capture; where our James Corsellis and Mark Brangstrup Watts business and consumer solutions can bring for their contributions as Directors, since the efficiency and value to new customers Company’s inception to their departure on during the time a vehicle changes 22 December 2017. ownership. We are excited by and committed to the opportunities ahead Our colleagues for BCA. The success of BCA is made possible by committed employees who co-operate and motivate each other to deliver solutions for our customers. Our culture is important to us and we look to provide opportunity for Avril Palmer-Baunack all, encourage progression and reward Executive Chairman success. We also look to our employees 27 June 2018 Alternative fuelled vehicles represent 1.4% of UK Vehicle Remarketing volume (up 36%)
Innovative Co-operation Respect Modesty
We are innovative We co-operate with and We treat our colleagues We are proud of our business and our motivate each other with respect achievements but we act modestly
BCA Marketplace plc Annual Report and Accounts 2018 3 BCA AT A GLANCE
Operating through four divisions, BCA offers a range of linked services throughout the vehicle lifecycle, leveraging its market leading physical and digital infrastructure.
The Group provides comprehensive vehicle management services to OEMs and fleet owners, and facilitates efficient changes in ownership between all types of vendors and buyers throughout a vehicle’s typical 12-15 year life span.
1 + 2 Vehicle Remarketing Operating as two divisions across the UK and Europe, Vehicle Remarketing facilitates the change in ownership of vehicles through physical and digital auctions. Additional services add value for vendors and provide certainty for buyers. +17.0% Adjusted EBITDA +14.4% Operating profit
For more information see page 24
1 + 2
#1 used vehicle exchange in the UK and Europe
4 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
#1 vehicle buying services provider in the UK
3
Vehicle Buying The division buys vehicles from consumers in the UK and from corporates in Europe, and sells these vehicles through the Vehicle Remarketing divisions. +17.9% Adjusted EBITDA 3 +30.3% Operating profit
For more information see page 34
4
Automotive Services Automotive Services provides: • services for new vehicles from port of entry or factory gate, including pre-delivery inspections, option fitment, customs management and delivery • management, demonstration vehicles and refurbishment for fleet vehicles • vehicle inspections and movements through both bulk moves and single vehicle moves 4 +25.0% Adjusted EBITDA #1 +8.1% transporter fleet Operating profit in the UK For more information see page 38
BCA Marketplace plc Annual Report and Accounts 2018 5 OUR BUSINESS TODAY
Business model Remarketing services are at the core of the Group’s business model, managing vehicle transactions between vendors and buyers. This is complemented by a broad range of value-added services that fuel the marketplace.
Customers
Products EFFI AGE CIEN ER CY V A CO N C D I T H R P A A N R S G P V O A E R G E B N & E CAR BUYING C CAR SUPERMARKET E Y BCA DEALER PRO L AUCTION VIEW U A N C DEALER S LIVE ONLINE INDEPENDENT DEALER BCA INSPECT PRO Y D WHITE LABEL CORPORATE PLATFORMS FRANCHISE DEALER E O AUTOSONSHOW N BUYER APP R O OEM I TRADER R L T I A S U M S ID R O IT F Y N A I N D D N V A AL TA UE DA
Supply is generated from a wide range of customers who use and the public who recognise the value, scale, choice and footprint auction as their primary disposal channel and who appreciate the offered by BCA. transparency, efficiency and liquidity provided by BCA. Vendors include OEMs, car dealerships, rental, contract hire, leasing and The Group’s systems capture information at key stages of the finance companies. Another key source of supply is from the vehicle’s life. The data is used to generate insight to optimise the Group’s Vehicle Buying division. divisions’ performance as well as to provide insight to customers. Knowledge of a vehicle’s history and condition allows for efficient Demand is generated by a large, diverse buyer base scheduling of refurbishment, repair and remarketing. that ranges from large car supermarkets to vehicle traders
BCA connects the marketplace BCA provides joined up, aggregated solutions to support the efficient change of vehicle ownership. Our solutions include:
Leasing, fleet and OEMs rental companies Dealers Buyers Consumers Transport Storage and dock facilities Inspection Preparation Remarketing Vehicle buying Fleet and inventory management Vehicle enhancement and refurbishment
Vehicles lose their value throughout their life and have high holding costs – BCA's integrated approach minimises holding periods, thereby maximising residual value.
In performing our services, BCA can take title to vehicles in outsourced remarketing contracts and within the vehicle buying businesses. Our exposure to residual pricing risks is minimised given the short holding period of the vehicles and the accuracy of our pricing tools.
Our remarketing buyer fees are stepped so do not hold a 1:1 relationship with vehicle value, thereby minimising the commercial impact of marginal changes in vehicle values on the business.
6 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
What makes us unique Our scale, coverage, liquidity, efficiency, transparency and data make us unique.
In our markets we have more data on vehicle condition related to value than our competitors, driving greater value and liquidity for our customers.
As the largest vehicle BCA Automotive has the largest webuyanycar.com has an 80% remarketing company in Europe UK transporter fleet, with more market share of consumer car BCA processes more vehicles transporters than the 2nd and buying and provided 12.5m than anyone else. In the UK, 3rd largest UK automotive quotes in the year to UK BCA auctions more vehicles than logistics providers combined consumers all the other vehicle auction companies combined 1.4 million 2.2 million 23 million vehicles sold in 2018 vehicles transported in 2018 website visits in 2018
BCA Dealer Pro and BCA BCA stores more vehicles than Where BCA takes ownership, Our extensive data, based on MarketPrice platforms provided anyone else, and has the largest we sell the vehicles in under real vehicle transaction values, 3.4m valuations in the year for de-fleet and refurbishment two weeks, thereby minimising is current, updated daily and business customers. Our pricing capability in the UK the impact of depreciation on based on short cycle times. tools draw on actual sales prices vehicle values It provides realistic value realised through our remarketing information to dealers channels 3.4 million 200,000+ 218,000 200 valuations for business cars on estate at 1 April 2018 vehicles purchased from UK up to 200 data points customers consumers collected per vehicle
BCA Marketplace plc Annual Report and Accounts 2018 7 MARKET OVERVIEW
Uniquely positioned providing solutions through our combined infrastructure of regional de-fleet facilities, vehicle logistics and preparation centres and a suite of remarketing channels, including digital and physical auctions. THE LARGEST INTEGRATED AUTOMOTIVE SOLUTION PROVIDER POST-MANUFACTURE
The typical 12-15 year lifecycle of a vehicle involves four to five changes of owner, providing opportunities for BCA to provide services to the keeper and to both parties on each transfer of ownership. 12-15yrs Average lifecycle of a vehicle
Vehicle buying
For more information see page 34
Vehicle Remarketing
For more information see page 24
At the end of a vehicle’s life there are decisions around salvage, the recycling of parts and eventual disposal. Strategic report Governance Financials
Automotive Services
For more information see page 38
During the vehicle’s life with each owner there are opportunities for multiple services such as service and repair to be coordinated and administered.
BCA Marketplace plc Annual Report and Accounts 2018 11 DIGITAL JOURNEY – THE CONNECTED MARKETPLACE
Delivering smart digital solutions BCA has been supporting customers with digital products for over Leveraging developments in consumer and business technology, 20 years. Over that time, our trusted position as a solutions provider from data warehouses through smartphones to robotic process in the automotive industry has been supported by evolving automation and machine-learning, BCA puts technology to work in platforms that serve our customer and business needs. We have supporting its many customers across the UK and Europe. acquired and developed a market-leading portfolio of platforms and applications that power our business day-to-day, including: In the past year BCA’s digital teams have shifted towards smart, iterative product development based on agile and other • Cutting-edge imagery and video processing methodologies; working in small multi-disciplinary teams to • Real-time online auctions anticipate and meet customer needs based on data insights. • Online vehicle buying Two recent app launches (see opposite page) demonstrate this • White-label inventory management and remarketing evolution. • Vehicle appraisal and grading • Browsable, searchable catalogues Automotive is an increasingly data-driven industry; our multiple • Vehicle valuation touch points across the life of a vehicle, supported by considerable • Inspection and transport management investment in data quality, data warehousing and analysis, give BCA and our customers a genuine advantage in everything from smart transport management to transactional margins. Data is the life-blood of everything we do at BCA, helping us to help our customers and drive the success of our business.
12 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
BCA Dealer app Next generation BCA Dealer app delivers a streamlined, efficient customer experience
The accuracy of part-exchange valuations is critical to BCA’s dealer customers, who need to ensure that they secure new vehicle sales without losing value when remarketing part-exchanged vehicles.
Dealers are aiming to build longer-term relationships with their customers by providing a seamless and efficient service, including real-time appraisal and valuation of part-exchange vehicles. This app is quick and simple to use; used on the forecourt with the customer, it provides transparency and builds trust.
The Group’s existing BCA Dealer Pro tool provides more than 2.2m part-exchange appraisals and valuations each year to dealer customers. This allows dealers to free up valuable forecourt space by allocating vehicles directly to auctions. 70% of our dealer volume is sourced through Dealer Pro.
We listened to our dealer customers and understood that they wished to simplify and streamline the part-exchange process for their customers. We have developed an enhanced, next generation app to address this requirement.
BCA Buyer app
BCA Buyer app ensures that a buyer never misses an opportunity to bid
Extensive face-to-face and online research with customers identified a need for an app providing real-time access to live auction information to support the buying process. BCA Buyer app was developed to address these needs.
BCA Buyer app is a tool for both physical and digital customers, with a smartphone application facilitating more efficient navigation of the auction buying process. BCA Buyer app enables buyers to access live information on the vehicles they are looking for at multiple auction centres, including pricing, vehicle condition, bids and individual lot/ auction timings.
Notifications that selected vehicles are approaching their auction slots ensure that buyers do not miss the opportunity to place their bid, either in the auction hall or online. If a buyer fails to secure a target vehicle, notifications straight to the buyer’s smartphone identify similar vehicles in upcoming auctions.
BCA Buyer app was built for and with customers to significantly improve the experience of both physical and online auctions.
BCA Marketplace plc Annual Report and Accounts 2018 13 STRATEGY
BCA’s strategy is to create value for customers through both acquisitions and organic growth in the automotive sectors in the UK and Europe. We continue to work with all major market participants to develop and adapt integrated solutions to solve and meet the needs of the participants across the automotive sector, maximising value for all stakeholders.
Short-term Medium-term Long-term
The Group will build upon the strengths We will continue to develop our BCA focuses on activities that are of its fulfilment capabilities, physical real operations through both organic growth non-core to OEMs, vehicle sellers and estate, knowledge and automotive and tactical acquisitions, with a focus vehicle owners, providing solutions relationships to enhance its operations upon the intelligent use of data and at scale. and integrated solutions in both the UK other innovations. and Europe. In Europe, the Group will Opportunities arising out of change seek to expand its footprint. Working The Group will seek to deepen the in-life in the automotive industry are a with customers, the Group will adapt service relationship, drive efficiencies and fundamental aspect of BCA’s success. services and solutions to meet the deliver value to the vehicle’s keeper. Identifying opportunities is an integral changing needs of the automotive part of the process of developing market at scale. strategies and drawing up forecasts. The scale of the Group’s infrastructure, Short-term divisional objectives are capability and the portfolio of products included in the divisional review on and services equip us to respond to a pages 27, 29, 35 and 39. wide range of developing automotive needs across the UK and Europe.
14 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
DELIVERING VALUE
For shareholders For corporate owners (OEMs, Attractive returns based upon a proven strategy, fleet operators and lease providers) strong management team and sustainable competitive Ability to fully outsource vehicle management, advantages. conditioning, driver contact and logistical moves.
• Strong earnings potential • Diverse revenue streams • Large scale physical • Transportation network • Cash generative business • History of performing estate for storage allowing efficient model when economic growth • Integrated real-time collection and delivery • Opportunities for organic is suppressed tracking of vehicles • Refurbishment and and acquisitive growth • Investment in the Group’s • Geographical coverage preparation capabilities long-term sustainable reducing logistics costs to retain value growth plans • Reduced time and • Progressive dividend depreciation to vehicle policy sale • Targeted pay-out ratio of 75% of earnings in the medium term
For remarketing buyers For remarketing vendors Fulfilling sourcing needs via the largest aggregation Optimised price performance and sale conversion of stock, providing choice, convenience and value. rates of used vehicles through a route that maximises financial return, speed and convenience. • Availability of a wide • Excellent vehicle choice of stock across presentation • Integrated services • Full portfolio of auction marques, models, • Full calendar of sales optimising returns services for best ages and conditions throughout the year to vendors presentation of vehicles • Clarity of vehicle • Stock funding service • Promotion of vehicles including appraisal, condition providing through BCA Partner including BCA Search valeting and BCA Assured buying confidence Finance, for managing cash and online aggregation • Bidding/buying demand • Market leading aggregator flow and as an additional of all vehicles achieved through buyer showing all stock with source of lending • Comprehensive vehicle base diversity comprehensive vehicle • Delivery of vehicles descriptions including • Efficient valuation, information including • Assistance with onward age, mileage, collection and guide pricing, giving vehicle marketing e.g. specification, condition, refurbishment services confidence to buy online imagery guide pricing and images
For WeBuyAnyCar customers For employees An alternative disposal option to part-exchange An innovative, co-operative and motivating or private sale. place to work.
• Accessible, online used • Quick and efficient • Attract and retain the vehicle valuation on-site process best employees • Transparent process • Convenient locations • Rewarding careers with • Any make, model or and opening hours opportunities for training condition purchased • Secure payment available and progression within two hours • Develop knowledge and skills • Safe and fair working environment • Established graduate scheme and workforce training programme
BCA Marketplace plc Annual Report and Accounts 2018 15 A TRACK RECORD OF FINANCIAL GROWTH
BCA has consistently delivered growth in adjusted EBITDA and Operating Profit over six consecutive results announcements since its admission to the Main Market in 2015.
Float on LSE 2015 2015 acquisitions 2016 acquisitions Inclusion in FTSE 250 2 April 2015 1 June 2015 4 February 2016 16 October 2017 BCA Group acquired by SMA Vehicle Remarketing Ambrosetti UK acquired (vehicle Premium Listing Haversham Holdings, Float on acquired (auction business) preparation business) the London Stock Exchange (‘LSE’) 18 December 2017 as BCA Marketplace plc 25 August 2015 18 July 2016 Included in the FTSE 250, FTSE BCA Automotive acquired Paragon Group acquired 350 and FTSE All-Share indices (automotive logistics business) (automotive services group)
31 March 2017 Supreme Wheels acquired (alloy wheel refurbishment business)
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GROUP OPERATING REVIEW Continuing to deliver growth
BCA performance The Group has delivered another year of strong profit growth, performing above market expectations with continued progress in all divisions. The result was driven by a combination of organic volume growth, increasing penetration of services, improved efficiency and the benefits of greater operational integration of the acquired businesses.
Group performance review1 Year ended 1 April 2018 Year ended 2 April 2017 Adjusted Other Operating Adjusted Other Operating Revenue EBITDA2 SONR3 profit Revenue EBITDA2 SONR3 profit £m £m £m £m £m £m £m £m UK Vehicle Remarketing 941.4 98.8 (0.7) 67.1 753.8 84.0 4.8 57.8 International Vehicle Remarketing 154.3 30.1 (1.7) 12.4 135.4 26.2 0.3 11.7 Vehicle Buying 980.5 23.0 – 15.9 837.0 19.5 – 12.2 Automotive Services 355.3 21.5 (0.6) 8.0 303.5 17.2 0.7 7.4 Group costs – (13.9) (1.8) (15.8) – (11.3) (3.4) (14.8) Total 2,431.5 159.5 (4.8) 87.6 2,029.7 135.6 2.4 74.3
Growth in volume drives revenue, adjusted EBITDA and operating profit Group revenue was £2,431.5m (2017: £2,029.7m) with growth generated from all operating divisions. The significant increases in revenue arose from the sale of more vehicles acquired through the Vehicle Buying division, more vehicles sold under outsourced remarketing contracts (where the full sales value is included in revenue) in the UK Vehicle Remarketing division, and the full year impact of the Paragon acquisition along with continued organic growth of services across all divisions.
Strong volume performance in each of the divisions, increased penetration of services, and internal efficiencies, including through increased internal transport, all contributed to an adjusted EBITDA for the year of £159.5m (2017: £135.6m), an increase of 17.6%.
UK Vehicle Remarketing adjusted EBITDA grew by 17.6% driven by 6.5% growth in vehicle sold volumes, the increased penetration of BCA Partner Finance and the execution of outsourced remarketing contracts. International Vehicle Remarketing saw a 4.3% increase in volumes which, together with higher export volumes, increased penetration of transport services and a favourable exchange rate, generated a 14.9% increase in adjusted EBITDA.
Vehicle Buying adjusted EBITDA increased by 17.9% as a result of a 12.9% increase in WeBuyAnyCar volume and a slightly higher average sale value per vehicle, delivered while maintaining control of the cost base. Automotive Services adjusted EBITDA increased by 25.0% due to the increased use of the Group’s own internal transport fleet and the full year impact of the Paragon and Supreme Wheels acquisitions.
Non-GAAP measures Key Performance Indicator – adjusted EBITDA Management uses an adjusted profit measure to monitor the ongoing profitability of the Group, which is defined as Earnings before interest, taxation, depreciation and amortisation (‘EBITDA’) adjusted for significant or non-recurring items (‘SONR’). The significant or non-recurring items that are excluded from EBITDA to calculate adjusted EBITDA are as follows:
• acquisition expenses and gains and losses on business combinations, disposals and changes in ownership; • income and expenses that are significant or non-recurring or non-trading in nature, including business closure costs, restructuring costs and onerous lease provisions; • impairment charges and accelerated depreciation and amortisation on property, plant and equipment, intangibles and goodwill; • amortisation of intangible assets arising on acquisition of businesses.
The Directors primarily use the adjusted EBITDA measure when making decisions about the Group’s activities as it is the most reliable and relevant profit measure across all segments. As this is a non-GAAP measure, adjusted EBITDA measures used by other entities may not be calculated in the same way and hence are not directly comparable.
Key Performance Indicator – adjusted earnings per share Adjusted earnings per share is presented in addition to the disclosures required by IAS 33, Earnings per Share, to align the adjusted earnings measure with the performance measure reviewed by the Directors. The Directors consider that this gives a more appropriate indication of underlying performance. Adjusted earnings per share amounts are calculated by dividing net profit for the period attributable to ordinary shareholders, adjusted for significant or non-recurring items and their associated tax impact by the weighted average number of Ordinary shares outstanding during the period.
1 In order to present the Group and Company’s financial position in the most meaningful way, BCA prepares its accounts to a Sunday within seven days of 31 March, this year being the 52 weeks to 1 April 2018 (2017: 52 weeks to 2 April 2017). The acquisitions of Paragon and Supreme Wheels are included from their respective acquisition dates 2 Adjusted EBITDA - see Non-GAAP measures above 3 SONR is significant or non-recurring items which include amortisation of acquired intangibles and other SONR – see Non-GAAP measures above
BCA Marketplace plc Annual Report and Accounts 2018 17 GROUP OPERATING REVIEW continued
Group costs of £13.9m were incurred in the year (2017: £11.3m) reflecting the continued development of the corporate capability following the move to a Premium Listing on the Official List, improved management capacity to deliver joined up solutions across the divisions for OEMs and major corporates and the share based payment IFRS2 charge of £2.0m (2017: £1.6m).
Operating profit of £87.6m increased by £13.3m, driven by the £23.9m growth in adjusted EBITDA set out above. This was offset by an increase in amortisation of acquired intangible assets of £1.7m to £40.2m as a result of the full year impact of the Paragon acquisition and a £7.2m increase in other SONR items. The current year other SONR items included £5.5m of management restructuring costs as part of our efficiency improvement programme and £1.0m of costs related to the move to a Premium Listing, partially offset by a £1.7m profit on the sale and leaseback of site developments at Manchester and Bedford. In the prior year, other SONR items amounted to an income of £2.4m, which comprised a £5.3m profit on the sale and leaseback of the Birmingham Perry Barr site, offset by acquisition related costs of £2.9m.
Divisional financial performance UK Vehicle Remarketing Year ended Year ended Highlights 1 April 2018 2 April 2017 Change Vehicles sold (‘000) 1,018 956 +6.5% Revenue per vehicle (£) 925 788 +17.4% Revenue (£m) 941.4 753.8 +24.9% Adjusted EBITDA1 (£m) 98.8 84.0 +17.6% Operating profit (£m) 67.1 57.8 +16.1% Adjusted EBITDA per vehicle (£) 97 88 +10.2% Adjusted EBITDA margin (%) 10.5 11.1
The UK exceeded the milestone of one million vehicles sold in the year. The volume of vehicles sold through our UK auctions has continued to grow, up 6.5% on prior year. This was driven by strong growth in volume sourced from the Vehicle Buying division, alongside new customer wins in both the OEM and franchise and non-franchise dealer sectors, with increasing volumes from existing customers.
UK Vehicle Remarketing revenue increased by 24.9% to £941.4m, driven primarily by the growth of outsourced remarketing contract volume (where the full sales value is included within revenue) as well as growth of remarketing volume and penetration of remarketing services. Outsourced remarketing has grown as vendors are attracted to the speed, liquidity and simplicity the service provides, while allowing them to remove the costs of running what is to them a non-core operation. Penetration of auction services including valeting, BCA Assured and smart repairs continues to grow year-on-year. A greater number of customers have also incorporated additional services including the Group’s Dealer Pro (see page 13) and AutosOnShow (see page 32) applications to improve control of their valuation, inventory management and imaging.
The ability for selected partners to fund part-exchange vehicles and the introduction of dedicated BCA Partner Finance branded sales programmes have contributed to an increase in the number of vehicles funded through BCA Partner Finance. Penetration has increased to 12.6% of all UK Vehicle Remarketing vehicles sold in March 2018 (March 2017: 11.3%). The resultant asset-backed loan book grew to £148.4m (2017: £113.4m) reflecting the increased volume and a higher average value of the vehicles financed at the year end. BCA Partner Finance funded £841m of vehicles during the year (2017: £577m).
Adjusted EBITDA per vehicle increased by 10.2% to £97, reflecting the increased penetration of products and services, improved operational efficiency through increased volume throughput and expanded sales programmes. This was achieved despite a backdrop of legislative changes leading to higher costs of labour, business rates and insurance premium tax. Adjusted EBITDA margin in the UK of 10.5% (2017: 11.1%) is slightly lower as a result of increased outsourced remarketing contracts, where we recognise the full vehicle sale revenue, reducing the reported margin percentage.
International Vehicle Remarketing Year ended Year ended Highlights 1 April 2018 2 April 2017 Change Vehicles sold (‘000) 362 347 +4.3% Revenue per vehicle (£) 426 390 +9.2% Revenue (£m) 154.3 135.4 +14.0% Adjusted EBITDA1 (£m) 30.1 26.2 +14.9% Operating profit (£m) 12.4 11.7 +6.0% Adjusted EBITDA per vehicle (£) 83 76 +9.2% Adjusted EBITDA margin (%) 19.5 19.4
Adjusted EBITDA (£m) at constant prior year exchange rate 28.6 26.2 +9.2% Adjusted EBITDA per vehicle (£) at constant prior year exchange rate 79 76 +3.9%
1 Adjusted EBITDA is defined on page 17
18 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
The International Vehicle Remarketing division increased volume to 362,000, a growth of 4.3% compared to the prior year. Increased volume, service uptake and favourable exchange rates delivered revenue of £154.3m, a growth of 14.0% (8.4% at constant exchange rates).
Adjusted EBITDA growth of 14.9% (9.2% at constant exchange rates), reflects the increased volume and operational gearing from the extensively online model. If measured at constant prior year exchange rates, revenue and adjusted EBITDA per unit would have been £406 and £79 (2017: £390 and £76), growth of 4.1% and 3.9% respectively. The average exchange rate for the year was €1.136:£1 compared to €1.194:£1 in the prior year.
Management continues to promote auction as a disposal channel and is building strong relationships with vendors and buyers across Europe. In the year BCA MarketPrice, the Group’s European dealer-focused part-exchange valuation tool, drove growth in remarketing volumes, while helping vendors to maximise their part-exchange performance. BCA MarketPrice provided 1.2m valuations (2017: 1.1m) to a dealer base that has grown to 2,200 dealers (2017: 1,800).
The Group’s geographical coverage, flexible sites and online platforms, supported by its ability to collect, inspect, store and deliver vehicles, ensures accessibility to a large number of buyers through both physical and digital auctions. This infrastructure has the capacity to allow efficient growth as demand from vendors and buyers increases across Europe and beyond (see more on vehicle exports on page 29). The newly created European transport brokerage operation continues to develop by sourcing and managing the efficient movement of vehicles to support the increasing volume of exports.
During the year, our operations in Europe have experienced differing underlying market conditions ranging from favourable markets driven by vehicle exports in Denmark and Sweden, stable markets in the majority of countries and more challenging market conditions in Germany and Italy. Our international portfolio of established vehicle remarketing operations allows us to sustain development in comparison to nationally focused competitors.
Vehicle Buying The Vehicle Buying division incorporates WeBuyAnyCar in the UK and vehicle buying operations in Europe.
Year ended Year ended Highlights – UK 1 April 2018 2 April 2017 Change Vehicles sold (‘000) 219 194 +12.9% Revenue per vehicle (£) 4,202 4,114 +2.1% Revenue (£m) 920.3 798.1 +15.3% Adjusted EBITDA1 (£m) 23.0 19.5 +17.9% Operating profit (£m) 15.9 12.2 +30.3% Adjusted EBITDA per vehicle (£) 105 101 +4.0% Adjusted EBITDA margin (%) 2.5 2.4
Year ended Year ended Highlights – International 1 April 2018 2 April 2017 Change Vehicles sold (‘000) 12 7 +71.4% Revenue (£m) 60.2 38.9 +54.8% Adjusted EBITDA1 (£m) – –– Operating profit (£m) – ––
WeBuyAnyCar celebrated its sixth consecutive year of double digit volume growth, an increase of 25,000 vehicles or 12.9% compared to the prior year, reinforcing our dominant market position as the UK’s leading buyer of vehicles. The increased volume and higher average price per vehicle drove revenue 15.3% higher to £920.3m. Rigorous inventory management and a varied auction programme across a number of the Group’s vehicle remarketing centres, allow us to consistently sell WeBuyAnyCar vehicles within an average of ten days from purchase, minimising holding risks.
The business model and evolving advertising have focused on communicating and delivering an easy, trusted, convenient and secure experience to consumers. With a network of over 225 branches, WeBuyAnyCar is conveniently located, close to customers throughout the UK, and makes offers on all vehicles, regardless of mileage, age or condition. Our business model attracts a diverse range of vehicles and during the year we have purchased across the whole spectrum, from 58,000 superminis to 108 super cars including a £216,000 Rolls-Royce Wraith Coupe. The oldest car purchased was a 40 year old MG Midget 1500, and the rarest purchases included a Corvette Stingray, a Ford Dorchester, a Lamborghini Gallardo Spyder and a Pontiac Firebird.
BCA Marketplace plc Annual Report and Accounts 2018 19 GROUP OPERATING REVIEW continued
We are proud that in the year, webuyanycar.com maintained 5 stars out of 5 in Trust-pilot ratings. We continue to focus on providing a transparent service and earning increased customer trust in the service we provide.
The increased volume of vehicles sold drove a 17.9% improvement in adjusted EBITDA to £23.0m (2017: £19.5m). The ongoing refinement of our valuation process allows margins to be tightly controlled while continuing to deliver growth in volumes.
In Europe, our vehicle buying businesses focus on purchasing batches of vehicles to remarket through the International Vehicle Remarketing division. They target opportunities to drive increased remarketing volume, raise awareness of auctions and deliver increased value or efficiency for OEMs and corporates. Revenue in International Vehicle Buying increased to £60.2m, up 54.8%. These operations enrich the variety of vehicles available to the International Vehicle Remarketing division, so are managed to cover operating costs within the Vehicle Buying division.
Automotive Services The Automotive Services division was created to bring together the Group’s new and used vehicle storage, preparation, handling, enhancement, refurbishment and transport capabilities. This integration has enabled the Group to provide a comprehensive suite of services to customers in a more connected manner.
Year ended Year ended Highlights 1 April 2018 2 April 2017 Change Revenue (£m) 355.3 303.5 +17.1% Adjusted EBITDA1 (£m) 21.5 17.2 +25.0% Operating profit (£m) 8.0 7.4 +8.1% Adjusted EBITDA margin (%) 6.1 5.7
Revenue growth of 17.1% was driven primarily by the full year impact of the Paragon and Supreme Wheels acquisitions.
BCA Vehicle Services won the tender as port of entry operator for the Renault-Nissan-Mitsubishi Alliance at Southampton. The anticipated slowdown in new car sales slightly suppressed profitability, while increased inspections and storage volumes were handled, and improved incentivised customer service levels were achieved.
BCA Fleet Solutions continued to drive customer service improvements and develop new relationships with rental and fleet companies resulting in a number of new long-term contracts. Linked to these service developments, BCA Fleet Solutions is investing in state of the art technology including facilities for handling electric and hybrid vehicles. Further progress has been made in the efficiency of refurbishment of BCA's own vehicles, delivering a better quality inventory for buyers whilst protecting residual value.
During the year, BCA Logistics continued to perform well, driven by prior year improvements in operating efficiencies, increased inspect and collect volumes and vehicle movements. The inspection platform was enhanced and the majority of inspections (including branch based inspections) were migrated to the new platform, delivering improved customer service levels. The business unit completed its move to a new centralised operational headquarters located in Solihull providing increased capacity for this growing operation.
Three years ago we performed no internal transport, but over 46% of the vehicle movements arranged by the UK Vehicle Remarketing division are now delivered internally by BCA Automotive, increasing the overall integration of the business and efficiency of transport.
Vehicle movement costs have reduced for BCA Automotive and BCA Logistics through the use of hub and spoke transport routes.
1 Adjusted EBITDA is defined on page 17 2 SONR and other SONR are defined on page 17
20 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Financial performance review The following table reconciles adjusted EBITDA to statutory operating profit by division:
Year ended 1 April 2018 Year ended 2 April 2017 Depreciation Amortisation Depreciation Amortisation Adjusted and of acquired Other Operating Adjusted and of acquired Other Operating EBITDA1 amortisation intangibles2 SONR2 profit EBITDA1 amortisation intangibles2 SONR2 profit £m £m £m £m £m £m £m £m £m £m UK Vehicle Remarketing 98.8 (12.5) (18.5) (0.7) 67.1 84.0 (12.5) (18.5) 4.8 57.8 International Vehicle Remarketing 30.1 (3.9) (12.1) (1.7) 12.4 26.2 (3.3) (11.5) 0.3 11.7 Vehicle Buying 23.0 (1.3) (5.8) – 15.9 19.5 (1.6) (5.7) – 12.2 Automotive Services 21.5 (9.1) (3.8) (0.6) 8.0 17.2 (7.7) (2.8) 0.7 7.4 Group costs (13.9) (0.1) – (1.8) (15.8) (11.3) (0.1) – (3.4) (14.8) Total 159.5 (26.9) (40.2) (4.8) 87.6 135.6 (25.2) (38.5) 2.4 74.3
The divisional operating structure continues to reflect the financial information that the Group’s Board, which is the chief operating decision maker, uses to make decisions about the allocation of resources, in accordance with IFRS 8, Operating Segments. Divisional operating reviews focus on adjusted EBITDA in order to give a more meaningful analysis, since depreciation, interest and tax are principally managed centrally on behalf of the Group and SONR items do not directly correlate to continuing divisional operating performance. A reconciliation of divisional adjusted EBITDA to operating profit is provided above.
Year ended Year ended 2 1 April 2018 April 2017 £m £m Total adjusted EBITDA1 159.5 135.6 Less: Depreciation and amortisation (26.9) (25.2) Amortisation of acquired intangibles2 (40.2) (38.5) Other SONR2 (4.8) 2.4 Operating profit 87.6 74.3 Net finance costs (11.7) (17.9) Profit before income tax 75.9 56.4 Taxation (18.9) (15.3) Non controlling interest (0.5) (0.2) Retained profit 56.5 40.9
Financing costs The net finance costs in the year were £11.7m (2017: £17.9m). The lower net finance costs were driven by the full year impact of the February 2017 refinancing and lower amortisation of capitalised debt issue costs, partially offset by an increase in LIBOR during the year. The prior year finance costs included the non-recurring write off of £4.9m of debt issue costs in relation to the previous facility.
Taxation The tax charge of £18.9m (2017: £15.3m) included a £9.1m net tax credit in relation to SONR items, including £8.2m relating to amortisation of acquired intangible assets. This resulted in an effective tax rate for the year of 24.9% (2017: 27.1%). Excluding the impact of the other SONR items in the year, the Group had an underlying tax rate of 23.1% (2017: 21.8%).
The effective tax rate for the year of 24.9% was higher than the standard rate of corporation tax in the UK (19.0%) as a result of permanent disallowable items, adjustments in respect of prior periods in both the UK and overseas, and the impact of higher income tax rates in Europe.
Permanently disallowable items comprise expenditure incurred that does not qualify for a tax deduction in the territory in which it arises. The increase in permanently disallowable expenditure is a result of the higher level of cost incurred in the year as well as a remeasurement of tax risk in key overseas territories. Prior period adjustments relate to changes in the composition of deferred tax assets in the UK which is offset by additional income tax payable in respect of prior periods in Europe following the closure of a tax audit overseas. Management expects the Group’s underlying tax rate to remain in the low twenties over the short to medium term, before the anticipated impact of the UK’s future reduction in the corporation tax rate from 19.0% to 17.0% reduces the overall tax rate from 2020 onwards.
The Group is routinely subject to audit by tax authorities in the territories in which it operates. Where points are investigated, the Group considers each issue on its merits and, where appropriate, holds a provision in respect of the potential tax liability which may arise. There are no provisions that are individually or collectively material.
BCA Marketplace plc Annual Report and Accounts 2018 21 GROUP OPERATING REVIEW continued
Tax contribution and framework During the period to 1 April 2018 the Group’s tax payments and tax collected on behalf of tax authorities totalled £133.5m (2017: £112.5m) across the jurisdictions in which it operates, excluding VAT. Of this total, £77.0m was borne by the Group, and £56.5m was collected on behalf of the tax authorities. The split of the taxes paid is shown opposite. £21.5m In line with the Group’s published tax strategy, BCA is committed to paying the right Corporation tax amount of tax, when it is due, in the jurisdictions in which it arises, and views the payment of its tax liabilities as an integral part of maintaining high standards of corporate social responsibility. The Group is committed to being fully compliant with all statutory obligations and ensuring a co-operative but robust relationship with the tax authorities as part of its wider strategy to provide attractive total shareholder returns.
The Chief Financial Officer has executive responsibility for tax matters. The Group has strong relationships with professional advisers and utilises in-house specialists to ensure that tax risks are appropriately considered. When entering into commercial transactions, £35.2m the Group seeks to be efficient, but fully compliant with all tax obligations. Employer’s tax contributions Profit after tax Profit after tax for the year was £57.0m, which was 38.7% higher than £41.1m in the prior year. Profit after tax is stated after charging tax of £18.9m (2017: £15.3m), other SONR costs within finance costs of £nil (2017: £4.9m), amortisation of acquired intangibles of £40.2m (2017: £38.5m) and other SONR costs within operating costs of £4.8m (2017: credits of £2.4m), giving an adjusted profit before tax figure of £120.9m which is 24.1% higher than the prior period of £97.4m.
Earnings per share and dividends £56.5m Adjusted diluted earnings per share were 11.4p, up 25.3% (2017: 9.1p). Earnings per Tax collected on behalf share were calculated by using adjusted earnings and the weighted average number of of employees shares in issue for the year as shown in note 7. Statutory basic and diluted earnings were 7.2p per share and 7.0p per share (2017: 5.2p and 5.1p per share) respectively.
The Board continues to target a pay out ratio of 75% of earnings as dividends. In addition to the 2.60p interim dividend per share paid in January 2018 (2017: 2.20p per share paid in January 2017), the Board is pleased to propose a final dividend of 5.95p per share (2017: 4.55p per share), subject to approval at the Annual General Meeting (‘AGM’) on 6 September 2018, to be paid on 28 September 2018 to shareholders on the Register on 14 September 2018. £15.5m Fuel duty Capital allocation framework The Group continues to manage its capital resources between reinvesting for organic growth, seeking acquisitions in line with strategy and maintaining its dividend pay out ratio. The Board remains committed to a sustainable dividend policy, reflecting the Group’s strong earnings potential and cash flow characteristics. The Company has significant distributable reserves (see Company balance sheet on page 126), and the cash and profits generated by the operating companies in the Group are regularly distributed up the Group in the form of dividends as required. £4.2m Property taxes
£0.7m Other taxes
22 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Cash flow and net debt During the year the Group continued to generate strong cash flow from operations of £206.2m (2017: £138.3m) and ended the year with net debt of £191.6m (2017: £260.5m). Cash conversion from adjusted EBITDA was 129.3% (2017: 102.0%). This was improved by £18.0m of auction payments which were made after the year end due to the Easter bank holiday. Cash conversion from adjusted EBITDA excluding these payments was 118.0%.
The net cash inflow from operating activities of £141.5m (2017: £64.5m) was used to fund investing and financing activities, including acquisition related payments of £13.6m. This comprised £9.6m, relating to the first of two instalments of performance related deferred consideration for Paragon (automotive service group acquired in July 2016), and £4.0m to acquire the remaining 49% of AutosOnShow. Construction of the Bedford and Manchester auction sites was completed during the year, with proceeds received from the re-finance of £20.1m. During the year, the Group paid dividends of £55.8m.
The Group definition of net debt excludes the debts relating to BCA Partner Finance and finance leases, as these are funded under separate asset-backed lending agreements.
During the second half of the year, the Group’s subsidiary, BCA Vehicle Finance Limited completed the syndication and extension of the BCA Partner Finance facility, increasing the facility to £200m on comparable terms. The facility provides capacity for the continued growth and penetration of the BCA Partner Finance proposition. At the year end, £105.5m (2017: £69.0m) was drawn, and BCA Partner Finance trade receivables supported by the facility grew to £148.4m (2017: £113.4m).
Finance lease liabilities principally relating to land, buildings and transporters totalled £31.9m (2017: £30.8m).
The Group continues to operate comfortably within its banking covenant, and to have sufficient headroom for future projects.
Purchase of own shares During the period 21 to 27 February 2018 the Company purchased 9,000,000 of its own shares at prices between 160.8p and 173.5p for a total consideration of £15.4m. These shares were held as Treasury shares and are included in reserves in the balance sheet, see note 23 (page 111) and the Company balance sheet (page 126). Following the balance sheet date, 2,245,554 treasury shares were used in settlement of the performance based incentive scheme, see note 25 (page 112) and note 29 (page 120) for further details.
BCA Marketplace plc Annual Report and Accounts 2018 23 DIVISIONAL REVIEWS
The Vehicle Remarketing divisions, which Vehicle Remarketing facilitated the sale of nearly 1.4m vehicles in Vehicle Remarketing is the marketplace for vehicles, the last year, operate in two distinct markets: the UK trading right-hand drive vehicles and enabling efficient changes of ownership through digital our international markets trading principally left-hand drive vehicles. The International and physical auctions in the UK and Europe. Our Vehicle Remarketing division enables the sale marketplace brings together vendors and buyers, providing and export of vehicles across country borders speed of vehicle disposal and access to the latest market as well as within local domestic markets. pricing for vendors and an unrivalled choice of consistently In the UK, auctions are the primary volume disposal channel for corporates and dealers, graded available stock to buyers. whilst there is a significant opportunity to increase auction penetration in Europe. 1.4m 32.3% 68.6% Vehicles sold Online sales – UK Online sales – Europe
24 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Physical auction Outsourced solutions
Physical auctions are a key element of the Our remarketing solutions include multi- marketplace, bringing a wide range of vehicles channel digital marketing and telesales to together in each location. This creates an allocate volume to a variety of remarketing environment where buyers can view vehicles, channels; white label platforms allow franchise participate in the auction and observe local dealers to view, access and purchase available competitors’ market activity. stock; driver sales support direct sales of vehicles coming off lease; closed auctions Across our 51 auction sites, buyers can view enable remarketing of vehicles to selected the inventory, bid for vehicles, pay for customer groups; and ultimately digital and purchases and arrange delivery. physical auctions provide broad access to independent dealers and car supermarkets.
Our Buy Now proposition offers direct sale of vehicles prior to allocation into other remarketing channels.
BCA’s outsourced remarketing solutions are provided in the UK to OEMs, fleet and leasing companies, enabling customers to choose which elements of vehicle processing (which are non core for their operations) they wish to outsource. 23 28 UK auction European auction centres centres Services
BCA offers a range of services that enhance Digital auctions the marketability of vehicles by improving the information available to buyers offering clarity BCA Live Online runs online vehicle auctions regarding the vehicle’s condition: simultaneously with, or independently of, physical auctions. • Inspection and grading • Valuation eAuctions provides exclusively online auctions • Imaging and video with a physical auctioneer. • Collection and delivery • BCA Assured BCA’s online platforms allow buyers to • BCA Partner Finance purchase with the same confidence as at a physical auction. In three countries, France, Sweden and Switzerland, BCA operates auctions exclusively online.
A dedicated messaging service enables engagement with the auction clerk during the sale, along with instant visibility of the proxy bid. The online platform has advanced search tools to identify vehicles and provides a seven day purchase history. Vehicle information, available electronically, enables online buyers to participate alongside physical buyers in auctions across multiple centres from one location.
Bid Now provides time limited online auctions which are not run alongside physical auctions or with a physical auctioneer.
BCA Marketplace plc Annual Report and Accounts 2018 25 DIVISIONAL REVIEWS
UK Vehicle Remarketing 1.0m Vehicles sold
Where we operate
Auction locations
Partner Finance UKPartner Finance part-exchange Partner Finance branded auctions During the year, the Partner Finance offering has been expanded For car dealers, stock derived from part-exchanges, that is not to include part-exchange financing: aligned with the dealers’ profile, ties up valuable capital and space on forecourts. BCA Partner Finance branded auctions provide a • Using BCA Dealer Pro, selected dealers can value simple solution. part-exchange vehicles in relation to retail sales • Partner Finance will fund the part-exchange vehicle Our new sales section offering BCA Partner Finance part-exchange for up to 120 days vehicles is attractive to buyers; it brings together vehicles from a variety of sources to deliver a varied programme of makes and Partner Finance is straightforward and convenient, optimising models, ages and specifications. cash flow and freeing up working capital, making it easier to do business
26 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Developments Short-term objectives
During the year remarketing site • Continue to win volume through strong developments have delivered capacity customer relationships increases: • Secure volume for the long-term and grow to optimal scale • Capacity increased through the opening of • Grow BCA Partner Finance the new Manchester Auction Centre with • Enhance BCA product suite five vehicle lanes, and development of the • Expand digital information flow Bedford Auction Centre • Increase efficiency through use of • Leases of eight of our larger auction technology at auction branches centres were renegotiated for a term of • Expand outsourced solutions 25 years • We continue to assess opportunities to further expand capacity at existing and new sites • Land acquired for development at existing auction centres Interesting facts • Oldest car sold: a Wolseley 1500, first registered in 1957 • Highest hammer price: £245,000 for a Lamborghini Murcielago SuperVeloce Services • Most common vehicle: Volkswagen Golf (over 42,000) Improvements in BCA Dealer Pro, BCA’s cloud • Hybrid and electric: volume up 36.0% in based appraisal and valuation tool, have the year simplified the vehicle remarketing process for dealers (see pages 13 and 30)
• 40,000 vehicles are valued each week, helping dealers to consistently manage part-exchange administration • Dealer Pro contributes to an efficient, consistent part-exchange process across BCA UK Remarketing has solus dealership groups or preferred relationships with: • Allows dealers to select inventory to retain in the dealership group and directly push other vehicles to auction • BCA has the latest live auction prices fed directly into our valuation tools, providing a high level of accuracy for customers 7/10 Improvements in vehicle entry and Top 10 Fleet News information display have contributed to operating efficiency and enhanced customer leasing companies experience.
BCA Buyer app (see page 13) is providing relevant information to buyers to improve and streamline their experience. 8/10 Top 10 Motor Trader dealer groups
BCA Marketplace plc Annual Report and Accounts 2018 27 DIVISIONAL REVIEWS
International Vehicle Remarketing 362,000 Vehicles sold
Where we operate
Auction locations
28 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Building one market Brokered transport solution Through BCA’s online platforms, European During the year, we established a new auctions bring together buyers from 55 operation to provide brokered transport countries. In order to make this process as solutions within International Vehicle efficient and seamless as possible for buyers, Remarketing. Where buyers purchase vehicles branch appraisal and imaging, processes and from BCA in one location to export to another systems are being standardised to provide a country, the buyer requires transport services. consistent buyer experience across the BCA network. This maximises the choice of vehicles BCA has the ability to aggregate vehicles and for buyers and increases the number of buyers coordinate transport for faster delivery to the participating at each auction. It also continues customer. Brokered transport moved 2,754 to drive the penetration of Live Online in vehicles in its first seven months. Europe.
During the year, 55,703 vehicles were sold and exported to another country (2017: 45,275), an increase of 23.0%.
Short-term objectives Buyers from
• Grow volume through raising vendors’ auction awareness 55,703 • Standardise processes and tools Vehicles were sold and exported to and employ best practice another country • Build one market across Europe 55 • Deliver a consistent buyer experience countries • Expand service offering • Increase awareness and uptake of BCA MarketPrice
INTER-
NATIONALBCA Marketplace plc Annual Report and Accounts 2018 29 DIVISIONAL REVIEWS – CASE STUDIES
BCA in Partnership with Vertu Motors plc
In April 2017, the Group was pleased to announce an exclusive five year vehicle remarketing agreement with Vertu Motors plc, a nationwide dealer group that operates over 120 outlets across the UK, with vehicles from more than 20 manufacturers. This represents one of the largest partnerships in the UK vehicle remarketing industry and will provide significant benefits to both Vertu Motors and BCA.
Part-exchange vehicles from Vertu Motors are sold nationwide at BCA’s physical auction centres as well as being available to BCA Live Online customers. All eligible vehicles are offered under the BCA Assured scheme, building buyer confidence.
Vertu Motors has adopted AutosOnShow’s specialist vehicle guided imagery application, ensuring that used vehicle imagery is consistent and of a high quality across the business.
Robert Forrester, CEO of Vertu Motors plc said: “BCA offers an integrated and innovative approach to remarketing, together with complementary services such as BCA Dealer Pro and vehicle guided imagery that meet the needs of our dealer network. Uniquely in the UK marketplace, BCA has the scope, capacity and substantial buying power to efficiently manage the large volumes of stock generated by our nationwide dealer network back into the wholesale sector.”
3030 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
BCA Partner Finance Partner Finance is designed with the dealer in mind Partner Finance funding has now been extended to include part-exchange vehicles, making stocking decisions more accessible. Customers can appraise part-exchange vehicles through the BCA Dealer Pro app and determine whether they wish to retain these as Partner Finance funded retail stock or remarket them immediately through BCA.
BCA Partner Finance offers both franchised and independent dealers of all sizes up to 120 days’ funding on vehicles purchased at BCA auction centres. This was the first finance product to be launched that is specifically designed for the UK remarketing sector.
From its site in Warrington, Cheshire, the Rix Motor Company markets prestige cars to customers across the UK. It has built a reputation for excellent service and sees customers returning time after time for its large selection of vehicles.
Mr Reg Rix is the founder of the Rix Motor Company. He first started working with BCA in 1975 and has valued the support offered to his business over the years. Mr Rix said: “The efficiency of Partner Finance has enabled us to grow over 1,200+ 160% in the last three years. We now have a nationwide reputation for stocking prestige vehicles. Customers helped with finance facilities Partner Finance gives us the flexibility to source the best stock through BCA’s network of auction sites and online facilities. The funds are transferred immediately and the vehicle is often on the way to our forecourt on the same day, meaning that we can retail it immediately.
I value the genuine partnership I have with BCA and Partner Finance. They take the time to understand my business, and we are growing together in a mutually beneficial relationship. Trust underpins all this.
The part-exchange process has been much improved with the integration of Partner Finance into the Dealer Pro platform. It means I can fund the part-exchange or send it to BCA to remarket at the push of a button. It helps us close more sales, more efficiently.
Partner Finance is designed with the dealer in mind, and I think it is peerless in this sector.”
BCA Marketplace plc Annual Report and Accounts 2018 31 DIVISIONAL REVIEWS – CASE STUDIES
AutosOnShow Taking imaging from wholesale to retail AutosOnShow (‘AOS’) is enabling Volvo Car UK to benefit from a wholesale method of producing retail quality imagery and video of vehicles. A vehicle can be shared around a retailer network or placed on a customer facing portal as soon as it is imaged at the de-fleet centre. The approach radically shortens the time between de-fleet, retailer forecourt and retail sale.
High-quality images, video and a 360o slider of a vehicle are captured at BCA preparation centres and advertised immediately on Volvo’s internal retailer sites. As soon as the vehicle has been bought by a Volvo retailer, its digital information automatically appears on the central Volvo Used Car Stock Locator and can be featured immediately on the retailer’s website. The vehicle is acquired and advertised by the retailer before being physically moved.
Bruce Greenwood, National Used Car Programme Manager, Volvo Car UK said “We have been extremely impressed with the professionalism of the team at AutosOnShow and their continual evolution of the product. The fact that we haven’t mandated their solution across the network and yet 80% of retailers are using it is a testament to the quality and ease of use of the product.
We have seen a vast improvement in the quality of imagery and consistency across the network since using the AOS Solution. An essential element for the retailers is the higher efficiency they experience within their retailer operations and the new ‘wholesale to retail’ solution improves this even further!”
Andy Kirkham, Sales Manager at Paul Rigby Volvo Stourbridge said “Having the ability to get the vehicles’ images on our website as soon as we’ve bought them is fantastic! We can be advertising the vehicle up to 5 days before it even arrives on our forecourt.”
32 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
“The system is so effective, it enables us to image all of our vehicles centrally, ensuring consistently high quality images. There is a huge efficiency gain as we can get the images to the retailer immediately. AutosOnShow keep evolving their solution and we are keen to stay ahead of the game.” Graeme Oswald, National Remarketing Manager, Volvo Car UK
BCA Marketplace plc Annual Report and Accounts 2018 33 DIVISIONAL REVIEWS
The division provides an easy route of Vehicle Buying vehicle disposal for UK consumers, webuyanycar.com is the UK’s leading car buying service, increasing flexibility and their buying power in choosing a subsequent vehicle. leveraging its proprietary online pricing quotation system and As the clear market leader in consumer vehicle buying, we continue to attract rapid physical and electronic sale process. WeBuyAnyCar new customers and provide a positive purchases used vehicles directly from the public in the UK, and experience with a five star Trust-pilot rating. The number of repeat customers continues disposes of them through the UK Vehicle Remarketing division. to grow, demonstrating their increased trust in the brand and the value they In Europe, vehicle buying focuses on purchasing batches of attach to the vehicle disposal process. vehicles from corporates, providing mix and diversity to auction The division provides a diverse, controlled supply of vehicles into the UK Vehicle inventory in the International Vehicle Remarketing division. Remarketing division, with the proportion of vehicles sourced from this ‘third disposal channel’ representing over 20% of UK Remarketing volume. Through a varied auction programme, the average WeBuyAnyCar vehicle is sold within ten days of purchase, maximising 227 efficiency and minimising the Group’s WeBuyAnyCar sites exposure to the risk of price changes.
34 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Developments Short-term objectives
During the year WeBuyAnyCar launched a UK new advertising campaign • Grow volume through promoting Where we operate • Strengthening trust in the webuyanycar.com the third disposal channel Our locations are conveniently brand, building on strong brand recognition • Continue to broaden the appeal of located close to our customers. • Aligning the WeBuyAnyCar brands with the WeBuyAnyCar brand a trusted celebrity, Philip Schofield • Continue to improve customer service • Linking the brand with Dancing on Ice, • Provide vehicle mix and volume to a large and popular show reaching huge the UK Vehicle Remarketing division audiences • Maintain high levels of trust in the brand
In Europe, vehicle buying in Denmark and International Sweden has expanded, with many vehicles • Seed new sites and sale days in Europe being sold through export auctions to buyers • Provide vehicle mix and volume to the across Europe. International Vehicle Remarketing division
Interesting facts • Oldest car purchased: 1978 MG Midget 1500 • Highest value vehicle purchased: Rolls-Royce Wraith Coupe at over Services £216,000. • Rarest purchases: During the year WeBuyAnyCar has improved –– Corvette Stingray accessibility for customers, opening new –– Ford Dorchester locations near to customers, increasing the –– Lamborghini Gallardo Spyder availability of appointments through extended – 16’ – Pontiac Firebird opening hours and weekend operation, Average drive to a making it easier for our customers to do WeBuyAnyCar location business with us is 16 minutes • V ehicle buying locations increased from 206 to 227 as at 1 April 2018 • L ocations are close to our customers – an average drive of 16 minutes • 8 0% of vehicle buying locations are 27% open for business seven days a week (2017: 33%) of all vehicles purchased • Improving the consumer experience with were superminis easier to identify, more comfortable pods
BCA Marketplace plc Annual Report and Accounts 2018 35 DIVISIONAL REVIEWS – CASE STUDY
“Easiest transaction ever and for more cash than any trade-in offer I had.” Trust-pilot review 18 April 2018.
Customers view WeBuyAnyCar as straightforward, transparent and above all trustworthy WeBuyAnyCar has continued to focus on building trust with customers, once again achieving a 5 star (out of 5) rating on Trust-pilot. This reflects the speed, efficiency, straightforwardness and value provided by the service.
During the year, WeBuyAnyCar has maintained its position as the UK’s market leading vehicle buying service. The quick, easy and safe service for consumers continues to drive double digit growth year on year, from a combination of new customers and increasing levels of repeat business, reflecting greater recognition and trust in the brand.
We have continued to focus on making the service more convenient for customers, with longer opening hours and more sites opening seven days a week. We have also continued to invest in additional retail locations, with 21 site openings in the year bringing the total to 227 locations across the UK. A consumer is normally able to conclude the sale of their car within 60 minutes of obtaining a quote online.
A combination of strong brand, customer trust and quality service means that WeBuyAnyCar is well positioned for future growth.
3636 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
“Very Easy To Use - As straightforward and understandable as the TV ads show! I would certainly use the service again.” Trust-pilot review 19 April 2018.
BCA Marketplace plc Annual Report and Accounts 2018 37 DIVISIONAL REVIEWS
With its national network of sites, BCA has Automotive Services industry leading capacity and the ability to BCA has significant physical infrastructure, comprising provide efficient solutions and economies of scale spanning new vehicle, fleet solutions land for storage, facilities for services and the UK’s largest and de-fleet services. transporter fleet, combined with digital platforms to Through the integration of the acquired manage and track vehicles. businesses, service delivery is more connected, improving coverage, efficiency and service levels. The division comprises four core operations: BCA Vehicle Services, BCA Fleet Solutions, BCA Automotive and BCA Logistics.
BCA Vehicle Services provides new vehicle services • Reception, customs management and handling at port or factory gate • Pre-delivery inspection and preparation • Storage and compound management • Warranty and servicing • Customisation and accessory fitment
BCA Fleet Solutions delivers fleet management, de-fleet and refurbishment services • Fleet management • Fleet reporting • Refurbishment and de-fleet
BCA Automotive handles bulk logistics • Through a fleet of over 800 transporters 800+ BCA Logistics provides single Transporters vehicle movements • Inspect and collect • Single vehicle moves
38 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Developments Services
During the year the division has developed a • BCA Inspect Pro app used for in-life number of existing and new relationships and and de-fleet vehicle inspections invested in infrastructure: • Method to refurbish and improve • Commenced operations at Southampton own vehicles developed with the Renault-Nissan-Mitsubishi Alliance • Opportunity to improve grade for whom we are now sole port of entry • Increase sale value 265,000 operator • Without significant increase in stock Inspections undertaken in 2018 • Continued to win UK storage and holding period refurbishment contracts for OEMs • New contracts with leading vehicle rental • Commenced development of a new companies dedicated customer de-fleet centre • Increased delivery of internal movements • Continued investment in Electric Vehicle for the UK Vehicle Remarketing division, (EV) charging points at vehicle servicing increasing utilisation and efficiency for the centres transporter fleet and Group • BCA Logistics moved to a new centralised operational headquarters located in Solihull providing increased capacity • Increased Automotive fleet capacity with additional transporters Short-term objectives • Integrate further to provide a more efficient operating model • Further expand the suite of value added services • E fficient coordination of movements between divisions Where we operate • Package solutions for customers across all Group divisions • Refurbish and upgrade own vehicles for onward sale
Interesting facts
BCA Automotive transporters travelled 39 million miles last year – a distance that would reach Mars 2.7m Vehicles moved by Vehicles stored, refurbished and processed by transporters and Automotive Services during the year plated drivers in 2018 numbered 680,000
BCA Inspect Pro provided 265,000 vehicle inspections over the year
Vehicle Services
Fleet Solutions
BCA Marketplace plc Annual Report and Accounts 2018 39 DIVISIONAL REVIEWS – CASE STUDY
40 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Vehicle Services: Renault-Nissan-Mitsubishi Alliance Building on its long-term relationships, BCA is now the sole provider of UK port of entry services to the Renault-Nissan- Mitsubishi Alliance
BCA has enjoyed a relationship with the Alliance spanning more than 30 years. We provide a range of services including management of UK import activities at the ports of Tyne and Portbury.
In recognition of the technology and processes developed as part of this service BCA has been recognised with an Innovation Award at the European Renault-Nissan Logistics Convention.
During the year BCA was delighted to be awarded the contract to manage the remaining port of entry activity at the Alliance’s facility at Southampton Docks, making BCA the sole provider of their UK port of entry services. The three import centres now receive more than 200,000 vehicles annually from manufacturing facilities in Europe, India and Japan.
“The awarding of the Southampton business to BCA was based on a successful tender activity that not only provided a cost competitive solution for the Alliance but also provided synergy benefits in quality, training and standardisation. BCA now provide the Alliance services in all three of our import centres and with this bring the opportunity for us to react with greater flexibility and agility across our import centres while building on the services we can offer to our customers in the future.”
Chris Godfrey General Manager, Alliance Logistics Europe Outbound Engineering, Alliance Supply Chain Management
BCA Marketplace plc Annual Report and Accounts 2018 41 RISK MANAGEMENT
Principal risks and uncertainties The Group faces a diverse range of risks and uncertainties, which could have an adverse effect on its success if not managed. To address these, the Group has designed and embedded a risk management process to identify and monitor relevant current and potential risks and uncertainties and to develop mitigation plans to reduce the likelihood and/or impact of the risks. The Board takes overall responsibility for overseeing the effectiveness of the risk management process through the Audit and Risk Committee, with a particular focus on determining the nature and extent of the risks it is willing to take to achieve its strategic objectives.
The UK’s decision to withdraw from the European Union has increased uncertainty in the economy and for all businesses. BCA has a direct presence and trading relationship in a number of EU countries and the Board believes that Brexit will not significantly impact the Group’s ability to conduct business into or out of the EU in the short to medium term. Cross border transactions between the UK right-hand drive market and the international predominantly left-hand drive market are limited. The Group is, however, aware of possible changes that may affect the Group including economic and legislative changes in the period immediately following the proposed transition in 2019, impacts on customers’ businesses and possible changes in the movement and therefore supply of labour. The Board will continue to monitor the political, legal and macroeconomic developments.
Given the Group’s growth plans, we are prepared to accept a certain level of risk in order to remain competitive and to continue operating in ever changing markets. The Board is clear about the specific risks faced by the businesses and the level of risk that it is prepared to accept in each part of the business.
The Group’s approach to risk is reviewed regularly, and over time its approach towards each risk may adapt as markets evolve.
The Group maintains a Group risk register of the significant risks at Group level. Risk registers specific to business units are maintained by the senior management responsible for those areas and they perform regular risk assessments that consider and assess specific risks relevant to their operations. Each risk register has been compiled following comprehensive assessment of the business and its competitive environment. Appropriate responses and controls for all risks have been determined to, where possible eliminate, but more usually mitigate, the impact and likelihood of the risks. These risks are mapped and calibrated to the Group risk model to inform the Audit and Risk Committee on an ‘operations up’ basis.
Risk movement Our risk profile remains stable relative to last year, with the following key changes: • Economic environment – economic growth forecasts for consumer spending in a number of our key markets have been slightly downgraded. • Financial and liquidity – the Group refinanced its term debt in the prior year and has continued to see an improvement in its ratio of adjusted EBITDA to net debt. In the current year the Group has syndicated and extended its Partner Finance facility.
42 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
The principal risks and uncertainties that the Board believes could have the most significant adverse impact on the Group’s business are largely unchanged from the prior year and are set out below:
Risk movement key:
Increase Decrease No change
Risk Description Management Actions Change The Group could be impacted by any material adverse Management monitors market conditions on an 1 change in the general economic or geopolitical ongoing basis through the planning and reporting Economic environment in the UK and the rest of Europe. Activity processes. Consideration is given to scalability, environment levels in the automotive industry can be affected by adaptability and the provision of a wide range of such factors as the availability of consumer credit, the automotive services throughout the vehicle lifecycle to growth of average wages and the level of provide responsiveness and resilience. unemployment, amongst others, which in turn could impact (over time) the volume of vehicles handled by the Group. Due to the relative size of the UK business compared to Europe, the Group is more exposed to changes in the UK economic environment. The Group’s future operating results are dependent, in Extensive strategic planning, due diligence and 2 part, on its success in implementing its strategic initiatives. integration modelling are conducted to ensure Strategic The Group’s strategic initiatives are focused on expanding alignment and fit of acquisitions. its Vehicle Remarketing operations and platforms, its Vehicle Buying division and its Partner Finance business Acquisition and organic business development are together with expanding the Group’s services businesses. focused on services complementary to the Group’s For more detail see Strategy on page 14. These initiatives existing offerings. require extensive planning and management attention and therefore entail execution risk. Investment is made in management capability and sector expertise. The Group’s growth has, in part, been attributable to the acquisition of other businesses, and the Group may continue to expand its business through acquisitions and other business combinations in the future. Diversification of the Group through adding new business activities brings increased complexity and requires additional management resources and skills in order to execute the Group’s strategy of developing a more extensive automotive support services business. The Group’s business is dependent on the flow of The Group’s experienced commercial team uses 3 vehicles through its services. The Group’s key performance monitoring tools and key performance Commercial customers provide significant volumes. The loss of a indicators to maintain strong commercial relationships number of these customers or a significant adverse with its customer base, anticipating and solving issues change in the structure of the marketplace as regards as they arise. the normal terms of business could have a material negative impact on the Group’s future performance. Management works constantly to develop improved digital and physical services to meet customer needs.
BCA Marketplace plc Annual Report and Accounts 2018 43 RISK MANAGEMENT continued
Risk Description Management Actions Change The Group incurs significant employment costs and Management monitors market rates for wages and 4 competes with other employers to recruit and retain salaries, reviews employee turnover and through exit Operational employees. An increase in the wages and salaries interviews collates information on the appropriateness necessary to attract and retain suitable employees of the Group’s remuneration structure. may be necessary in the future. In addition, future legislative changes could lead to an increase in Management works with real estate advisers to payroll costs. identify, lease and manage suitable sites.
Availability of suitable land for the storage and Management reviews marketing investment options handling of vehicles is required to meet the Group’s on an ongoing basis, and undertakes price growth plans. negotiations appropriate to the scale of the business to allow the Vehicle Buying division to control cost The Group undertakes significant marketing activities, increases and to achieve good value for marketing in particular for its Vehicle Buying division, and any activities. material increase in advertising costs could increase the Group’s marketing expenses. Fuel escalation and statutory wage increase clauses are included in customer contracts where possible to The Group incurs significant fuel costs in its logistics protect the business from material changes in fuel operations that may escalate. If the Group is unable to and employment costs. pass on future cost increases to its customers, its operating profit margin could be impacted.
The loss of market share to competitors would have an Management works to maintain a strong market 5 adverse impact on volume, impacting the operational position by ensuring very high standards for each of Competition and financial performance of the Group. the services provided by the Group, offering a wide portfolio of well-situated sites that provide efficient solutions for customers and the ability to store and manage significant volumes of vehicles.
Management also strives to position the Group as a market leader in innovation through technology to maintain a competitive advantage as new remarketing and distribution channels are created and trialled. The Group’s business and financial performance Management has been strengthened in this area with 6 depend on the effective operation of its information the appointment of a Chief Digital Officer, tasked IT systems and technology systems. Any issues with the reliability, with ensuring that the IT systems are fully aligned and availability or cyber security of the Group’s systems, with the Group’s strategies. information online service offerings and business information could security impact the Group’s reputation, the number of buyers Management employs specialist resources within the or vendors or necessitate additional costs. Group’s IT function to monitor information security, recommending and adopting improvements as necessary.
Regular disaster recovery testing and business continuity drills are performed.
Despite taking these measures, it is recognised that a cyber security attack on the Group could cause significant disruption and reputational damage. The Group’s intellectual property rights include The Group’s intellectual property rights are protected 7 proprietary technology relating to online auction legally, where possible, in every country in which the Intellectual systems as well as trademarks of the Group’s brands, Group’s products and services are distributed, property and business knowledge and copyrights. The Group has deployed or made available. brand well-established names and brands in many of the markets in which it operates. Any significant damage Management works with appropriate media to ensure to these could have an adverse impact on the Group’s the best coverage across the different media platforms. performance.
44 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Risk Description Management Actions Change A significant change in the Group’s senior The Remuneration Committee and the Board regularly 8 management could weaken the Group’s business and review the senior management remuneration policy Management its ability to execute its strategy. The Group’s senior and engagement to ensure that both are market management has extensive experience in the industry appropriate and motivational. Given the scale and in which the Group operates and has skills that are success of the business, the Group is confident that it critical to the operation of the Group’s businesses and is capable of attracting and retaining management the execution of its strategy. resources of the highest quality. The Group reports its results in Sterling but operates in Management monitors the macroeconomic and 9 the UK and continental Europe and is therefore exposed legislative changes in the markets in which it Financial to foreign currency exchange rate fluctuations. operates. and liquidity The Group’s strategy involves, amongst other things, Credit provided to customers is monitored closely, growing areas of the business that include providing with additional security taken under a risk based credit facilities to vehicle buyers and buying and approach. holding vehicles in different countries as inventory, on a short-term basis, prior to resale through the Group’s Regular dialogue is held with the Group’s banks. remarketing centres. Systems, procedures and controls are regularly The Group relies on its finance providers to provide reviewed to identify, detect and remediate any adequate debt to enable the Group to execute its transactional issues. strategies. The Group’s financing is all held at floating interest rates.
The Group operates in multiple taxation regimes which increases the complexity and risk of compliance with certain indirect taxes such as VAT or its equivalent. The Group’s operations are subject to compliance with Management continues to ensure that the central 10 extensive laws and regulations, both in the UK and legal function plays a key role within the Group and Regulation across continental Europe, including laws relating to retains external specialist legal advisers as necessary and vehicle brokerages and auctions, data protection, to support the businesses in the countries in which legislation competition, consumer protection, health and safety, they operate. money laundering, bribery and taxation. Non- compliance with, or a change in, these laws and Health and safety experts are employed to provide regulations could have an adverse effect on the advice on best practice and to ensure this is acted upon. reputation and performance of the Group. Management has prepared for the introduction of GDPR in May 2018 by issuing new policies and setting up a team to ensure that the Group was compliant by the deadline. A Data Protection Officer has been appointed. Natural events, such as hailstorms and flooding or Management monitors possible causes of physical 11 other events such as terrorism, large-scale accidents or damage on a site-by-site basis and risks and concerns Physical theft may impact the Group’s physical auction facilities are reported to ensure that there is full visibility of any damage or affect vehicles stored on the Group’s property potential issues that might occur. Where remedial or awaiting sale or other activity. preventative action is recommended, management considers the appropriateness of such actions on a commercial basis. Insurance cover is in place where required.
BCA Marketplace plc Annual Report and Accounts 2018 45 CORPORATE RESPONSIBILITY
BCA recognises its place as an employer, both within the industry The Group encourages diversity and is committed to providing an and within the wider environment and aims to conduct its business equal opportunities workplace with a genuinely inclusive culture, in a safe, secure, legal and ethical manner for all interested parties. maintaining a workplace that is fair, respectful and free from Continuing to maintain its already high standards is vital to the discrimination. BCA treats its employees and job applicants fairly continued success and development of the Group. and equally in accordance with its employment practices, policies and procedures and irrespective of age, disability, sex, sexual The Board has overall responsibility for corporate responsibility, orientation, gender reassignment, race, colour, ethnic or national regularly assessing the needs of the Group’s stakeholders and origin, religion or belief, marriage or civil partnership, pregnancy delegating day-to-day management of these issues to the divisional and maternity or paternity, or membership or non-membership of leaders within the operating businesses where appropriate. The a trade union. This commitment is reflected in the Group’s Code of Group’s principles of corporate responsibility, as set out in its Code Conduct. of Conduct, apply to all employees and sets the minimum expectation for their behaviour. Individuals are encouraged to apply for employment with the Group and the Group seeks to provide appropriate facilities to help Our employees applicants with a disability with their application and attendance We believe our people are the best in the business so we are for interview, so that they have an equal opportunity to be selected. committed to treating them properly and with respect. We seek Whilst employed by the Group, an employee’s needs may change to make working for BCA rewarding, combining a good working and, where this is the case, the Group will investigate, in environment with opportunities for career development. consultation with the employee, the possibility of making reasonable and appropriate adjustments to enable them to remain The Group operates initiatives which enable employees to gain in the Group’s employment and to undertake their role in nationally recognised professional qualifications. The apprentice accordance with those needs. training scheme runs across the Group’s UK businesses. The scheme can be tailored to match available roles and the requirements of The Group has published its statement in respect of the Modern the business with the apprentices’ skills and interests. The graduate Slavery Act 2015 and is continuing to address this matter with its training scheme, now in its 16th year, attracts high quality suppliers. Employees are encouraged to report any concerns they graduates from a variety of backgrounds. Examples of personnel may have through a confidential helpline should they not wish to whose careers have developed while employed by BCA can be seen address any such issue through their line manager. The Group will on pages 48 to 49. continue to monitor the position and any issues that come to its attention in this respect will be dealt with promptly on a case by Employee involvement and commitment are a key focus. The case basis. Group’s vision and performance are shared with employees throughout the year through meetings, written and electronic Environment communications and staff training. Annual conferences recognise The Group strives to maintain its assets, properties, land and employees for their achievements including great performance, boundaries to a condition that does not adversely affect or loyalty and commitment across different areas of the business. endanger its neighbours and the surrounding communities. The Group abides by the law and local planning requirements Gender diversity as at 31 March 2018 Female Male Total and considers and responds to issues or concerns raised by its Directors of BCA Marketplace plc 1 5 6 neighbours regarding the operation of its business promptly. Senior Managers (being direct reports of The Group’s locations integrate environmental management the Executive Chairman or into their operational systems and procedures. Environmental Chief Financial Officer) 2 20 22 performance, in relation to the emission and discharge of pollutants into the air and water, is monitored as part of the Group’s Other senior staff, department operations. heads and unit and regional managers 59 261 320 All employees 1,931 5,332 7,263
On 3 April 2018 the Group filed its gender pay gap report for the year ending 5 April 2017 for its seven qualifying subsidiary companies. The Equality Act 2010 (Gender Pay Gap Information Regulations 2017) sets out how information should be reported for companies with 250 employees or more and is a measure of the difference between men’s and women’s average earnings across an organisation regardless of their role or seniority. It is not the same as equal pay, as the gender pay gap does not show differences in pay for comparable groups of employees. The report can be accessed at www.bcamarketplaceplc.com/investors/corporate-governance.
46 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
BCA Automotive investment in its fleet and green technology Since 2015 BCA Automotive has undertaken a substantial programme of investment in its transporter vehicle fleet, incorporating the latest technology available within this specialist market.
BCA Automotive has worked closely with its equipment suppliers to find innovative ways to reduce emissions, reduce carbon footprint and save fuel. Our new transporters are chosen for economy and environmental efficiency, complying with the latest emissions standards whilst being suited to our specialised needs.
These new vehicles are equipped with Euro 6 engines along with additional features designed to ensure that they operate at the most efficient level of performance. This includes automatic gear changing systems that assist the driver by selecting the most appropriate and efficient gear, technology that combines vehicle performance information with active prediction, cruise control and map data to assess driving conditions and apply the most efficient fuel strategy.
Automated start-stop technology has been added to assist the loading and unloading process, automatically stopping the transporter’s engine when it is not required to power lifting the ramps. This development reduces engine running times during loading by up to 75%, significantly reducing fuel consumption.
BCA Marketplace plc Annual Report and Accounts 2018 47 CORPORATE RESPONSIBILITY – EMPLOYEE CASE STUDY
Sabrina Brown Dominic Burr Head of customer services, BCA Logistics Regional General Manager, BCA Perry Barr Chairman’s Employee of the Year I joined BCA in January 2002 at the age of 21 and instantly fell “Her can-do attitude has enabled her to successfully in love with the fast paced buzz of a live auction hall. My early centralise and rebuild the customer service team in the days in BCA saw me progress through various departments new BCA Logistics headquarters in Birmingham.” within the auction centre environment, giving me a good basic understanding of auction centre management but also I joined BCA in February 2009 as a customer service adviser. allowing me to learn lots of new skills, sharpen my business Due to the guidance and support I received from my manager knowledge and develop relationships with colleagues that at the time, I was promoted to key account manager, with remain to this day. responsibility for the Toyota, Nissan and Zenith accounts. The varied roles that I have progressed through have allowed In 2016 I was approached by the Managing Director – me to understand each area of the business. The Group’s BCA Logistics, who asked me to manage the customer services graduate scheme now provides a similar experience, giving team. I jumped at the chance, as it was my ambition to manage new joiners a 360˚ view of the business over a 12 month a large team. As head of customer services I became part of period, during which they experience each area of the business the BCA Logistics management team, I really started to learn and gain a strong basic understanding of BCA and its many about how to effectively manage and motivate a team to functions. successfully deliver great customer service. The support from my manager and my team has been paramount to my success BCA has offered me support, training and development and I’m so fortunate that the business has invested this trust throughout my career in various forms, from training days and in me. online courses to secondments and mentoring. My most recent role, leading the team at the Group’s newest auction centre at My dad always said “find a job you enjoy and you will never BCA Perry Barr, allowed me to put into practice the skills and have to work a day in your life”; I would say I have achieved knowledge that I have learnt from those that have led and this and I feel privileged to work at BCA. At times it is supported me. The training, guidance and mentoring I have extremely challenging but, as a team, we do it willingly. received has helped shape my progression and career I am excited to see what the future holds. development to date.
I have held the role as General Manager for Perry Barr since its opening in October 2016. My role has been to ensure the smooth and efficient running of a 20 acre auction centre in the Midlands that employs 80 staff and can offer in excess of 1,500 vehicles per week for auction. A typical day could involve meeting customers or suppliers for review meetings, reviewing management accounts, interviewing and recruiting, managing a busy auction day sale, new business meetings with prospective customers or even auctioneering. It is varied, exciting and challenging, but also very rewarding.
I have recently been promoted to a new role of Regional General Manger and I am looking forward to the new challenge and another exciting year ahead.
48 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Lloyd Haley Rose Saunders Pre-sale administration & sales manager, BCA Bedford Account Manager, BCA Logistics
My career with BCA started 20 years ago, four days before my I joined the Group in August 2016 as an administration 17th birthday. I had completed my work experience placement assistant at BCA Perry Barr. My role involved preparation for with BCA, which gave me a hunger for more. I enjoyed the the opening of BCA’s new auction centre and the delivery of obvious closeness of the team, can-do attitude, and excellent customer service for new buyers and customers. unwavering desire to exceed previous sales records, not to mention the excitement of the sale days themselves. I was encouraged to apply for the BCA graduate scheme, which started in January 2017. The scheme provided valuable I was lucky enough to be approached by the branch manager support from BCA employees and customers throughout for a position within the sales team, running several high the organisation, and a mentor advised and supported profile vendors. This was a daunting proposition at the time, my development. The scheme enjoys strong support from but the manager had faith in me and I unquestionably wanted BCA’s senior management team and every graduate has the a career within the BCA family. opportunity to present to the Chief Commercial Officer and Chief Operating Officer of UK Remarketing. The scheme was I have been fortunate to have worked at 13 of our UK an extremely valuable opportunity and has been a fantastic locations, small and large, sharing experiences to bring benefits foundation for my future career within BCA. to the next location. This has also given me the opportunity to sit on several focus groups, introducing me to a range of In October 2017, I was appointed as an account executive people from plated drivers and gate staff to administration, within BCA Logistics, with a two year personal development transport, sales and operations managers. plan for transition to the account manager’s role. I am now responsible for managing Toyota’s account with BCA Logistics, BCA has changed and developed since I joined, but our core and I have just been promoted to account manager! values remain within our DNA: our customers being at the heart of our business; a can-do attitude; innovation; pride in The scheme has enhanced my development and shown me the our work; modesty; and motivation. benefits of sharing experiences and working with colleagues across the Group. The training over the next year will enable I still have the same excitement coming to work today as I did me to enhance my overall management skills and focus on 20 years ago. I am proud to have contributed to what BCA has mentoring and developing others to achieve their full potential. become today and to be a part of where we go tomorrow. Comment from Andrew Yellop, Manager, Defleet & Remarketing, Toyota:
“I was first introduced to Rose Saunders when she spent a fortnight at Toyota & Lexus Remarketing during early 2017. Rose stood out for me, as someone who is intelligent, articulate, who listened with the intent of understanding and who could quickly understand and cope with the complexities of the OEM landscape.
When it became clear that Rose would be working within BCA Logistics, at a time when there was a vacancy for our account manager, we pushed for Rose to be considered for the role, as we felt that she would bring an added dimension to the way our account operates. We have not been disappointed with this decision.”
BCA Marketplace plc Annual Report and Accounts 2018 49 CORPORATE RESPONSIBILITY continued
Greenhouse gas reporting BCA is committed to providing a safe working environment The Group is required by the Companies Act 2006 (Strategic report wherever it operates, employing a proactive network of health and Directors’ report) Regulations 2013 to measure and report its and safety personnel, who share knowledge and experience with direct and indirect greenhouse gas (‘GHG’) emissions. the aim of fostering best practice and ensuring consistently high standards of safety across the Group. Health and Safety managers Direct GHG emissions are from sources that are owned or and committees are responsible for monitoring and reporting controlled by the Group. Indirect GHG emissions are a consequence adherence to the Group’s health and safety protocols to their of the activities of the Group that occur from sources owned or divisional leaders and the Health and Safety Executive Committee controlled by other entities. (HASEC) which ultimately reports on health and safety matters to the Board. Scope 1 emissions: Direct emissions controlled by the Group arising from the combustion of fuel that results from the Automotive Services fleet Our community and company cars. This is regardless of whether the vehicles are owned As a key participant of the automotive industry, BCA works with or leased as the Group is responsible for their emissions. the not-for-profit organisation Ben, which supports automotive industry employees and their families deal with problems they Scope 2 emissions: Indirect emissions attributable to the Group due may be facing. Ben provides a wide range of free confidential to its consumption of purchased electricity and gas. information, advice and support services, including highly regarded care centres at various locations throughout the UK. Further details The methodology used to calculate emissions is based on the GHG can be found at ben.org.uk Protocol’s Financial Control approach. Emission factors used are from UK government (‘DEFRA’) conversion factor guidance In September 2017, a group of 45 employees and customers of applicable to the year reported. BCA undertook a charity cycle ride from the Group’s site at Blackbushe to Paris to raise money for Action for A-T, raising over The report includes the ‘Scope 1’ (combustion of fuel) and ‘Scope 2’ £93,000 for the charity. Sponsors included Toyota and Renault (purchased electricity and gas) emissions associated with the from the manufacturing sector, as well as leasing companies ALD, Group’s offices and vehicles for the year to 1 April 2018. Revenue LexAutolease, LeasePlan and Olgivie and some of the biggest dealer has been used as the intensity ratio as this is a relevant indicator of groups in the country including Arnold Clark, Vertu, Marshall growth and is aligned with the Group’s business strategy. Group, Motorline, Halliwell Jones, Jardine, Ancaster, JCT600, Lookers and TC Harrison. Insurers Aston Scott and Secure Valeting 2018 2017 also backed the event, while Thrifty provided support vehicles for
Absolute carbon emissions (tCO2) the duration of the BCA Paris Challenge. Building on the success of Scope 1 74,981 71,026 last year’s ride, a further ride is planned for 2018 from Bedford to Scope 2 12,709 13,229 Amsterdam over 3 days. 87,690 84,255 Revenue (£m) 2,431.5 2,029.7
Carbon intensity (tonnes of CO2 per £m revenue) 36.1 41.5
The absolute carbon emissions have increased and primarily reflects the impact of the larger Automotive Services fleet and the full year impact of the acquisitions made in the prior year. The decrease in carbon intensity reflects the revenue growth in UK Vehicle Remarketing and Vehicle Buying. The Strategic report (which comprises the Business highlights, the Health and safety Executive Chairman’s Statement, BCA at a glance, Our business The health and safety of our employees, contractors, suppliers and today, Market overview, Strategy and value, Group operating visitors to our premises is taken very seriously by the Group. review, Divisional reviews, Risk management and Corporate responsibility sections) is approved by the Board of Directors and The Group’s Vehicle Remarketing divisions operate from over 50 signed on its behalf by: locations across the UK and Europe. 1.4 million vehicles were sold in the current financial year. In addition, the Group operates at over 225 locations to support the Vehicle Buying division. As large numbers of vehicles are stored and prepared for sale at these sites and at the physical auctions, members of the public and the Avril Palmer-Baunack Tim Lampert Group’s employees come into close contact with vehicles as they Executive Chairman Chief Financial Officer move to and from the auction hall. 27 June 2018
The Group’s employed and contracted drivers collect and deliver vehicles across both the UK and continental Europe and operate a fleet of over 800 vehicle transporters. Consequently, the Group’s operations are subject to regulations requiring adequate precautions to prevent injuries arising from collisions and impacts with other vehicles moving within the Group’s locations and on public roads. 50 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
GOVERNANCE
52 Board of Directors 54 Executive Chairman’s governance statement 55 Governance report 57 Nomination Committee report 58 Remuneration Committee report 65 Audit and Risk Committee report 67 Viability statement 68 Directors’ report 71 Independent auditor’s report
BCA Marketplace plc Annual Report and Accounts 2018 51 BOARD OF DIRECTORS
Avril Palmer-Baunack Tim Lampert Stephen Gutteridge Executive Chairman Chief Financial Officer Senior Independent Non-Executive Director
Date of appointment to Board Date of appointment to Board Date of appointment to Board 4 July 2014 30 September 2015 27 August 2015
Committee membership
A N R
Avril has over 20 years of executive Tim started his career in manufacturing Stephen has an extensive range of industrial experience with leading businesses in the companies before joining a division of and public company experience both as an UK automotive, support services, industrial Bombardier Inc. in finance roles in the UK Executive and Non-Executive Director across engineering and insurance services sectors. and the Middle East. He joined Autologic the oil and gas, utilities, packaging, training Through a number of high profile industry Holdings Plc in 1997 and held various roles and education sectors. He held the roles of roles, Avril has acquired significant including Finance, Logistics, Projects and Chairman at Nighthawk Energy plc between experience of delivering operational Managing Director. He was also involved in 2011 and 2014, at President Energy plc improvements and implementing business a number of acquisitions and disposals and, between 2007 and 2011 and also at Star turnarounds, executing organic and ultimately, the successful sale of this company. Energy Group plc from its IPO through to acquisitive growth strategies and a track its acquisition by Petronas. record of delivering shareholder value in a Tim was instrumental in the acquisition public environment. of the BCA Group and has a wide range Stephen’s executive experience includes of experience of the requirements of his role as Managing Director of Supply at Avril has also held a broad range of growth for large businesses. Tim is a fellow Seeboard plc during its time as a £1.5bn executive roles throughout the automotive of the Association of Chartered Certified publicly-listed utility company. Stephen is industry, with experience in companies Accountants. currently a Non-Executive Director of engaged in vehicle salvage, car hire, Fulcrum Utility Services plc. auctions, transportation, distribution, logistics, vehicle processing and infrastructure.
Avril was previously Executive Chairman and Deputy CEO of Stobart Group plc, one of the largest British multimodal logistics companies with interests in transport, distribution and infrastructure. Prior to this Avril was CEO of Autologic Holdings Plc, the largest finished vehicle logistics company in the UK and Europe. She joined Autologic from Universal Salvage Plc, where she held the position of CEO from March 2005 until the sale of the company to Copart UK Ltd in June 2007.
Avril is also currently Non-Executive Chairman of Redde plc and Safe Harbour Holdings plc.
52 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Piet Coelewij Jon Kamaluddin David Lis Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director
Date of appointment to Board Date of appointment to Board Date of appointment to Board 27 August 2015 27 August 2015 28 June 2016
Committee membership Committee membership Committee membership
A R A N A N R
Piet is a multilingual Dutch national who Jon is a fellow of the Institute of Chartered David Lis was Chief Investment Officer, has an extensive international background Accountants and has a strong background Equities and Multi Assets, of Aviva Investors and a proven track record of leading growth in finance, retail and e-commerce. Jon was, before his retirement in March 2016. David businesses in innovative and disruptive until October 2013, International Director began his career as an investment analyst business environments. Piet is CEO of of ASOS plc, having also held the role of at NatWest, following which he became a Wehkamp, the leading online department Finance Director and Company Secretary fund manager at J Rothschild Investment store in the Netherlands. Prior to that between 2004 and 2009. He was Management and Morgan Grenfell & Co appointment, Piet was Vice President of instrumental to ASOS plc’s significant Limited. David founded Windsor Investment Global Operations of US-based Sonos, growth and led its global expansion. Jon Management LLC, serving as managing a wireless HiFi equipment manufacturer, served on the ASOS main board throughout director until its acquisition by RBS fund and he has also held senior positions at his tenure, during which time ASOS market management arm, Capital House Limited. Amazon.com in the UK between 2007 and capitalisation grew from £30m to £4bn. David joined Norwich Union Investment 2011 and at Phillips Consumer Electronics in Management Limited in 1997 (later merging China between 2004 and 2006. Jon is the Senior Independent Director at to form Aviva Investors), before becoming FarFetch.com, a leading luxury clothing Head of Equities in 2012 and subsequently Piet’s extensive digital experience and marketplace and Non-Executive Chairman of Chief Investment Officer, Equities and background will support the Group’s digital Klarna, a privately owned digital payments Multi Assets. growth opportunities. business in Stockholm. David is a Non-Executive Director of Melrose Piet is an independent Non-Executive Industries plc and Electra Private Equity plc. Director of Displaydata Limited, a UK based privately owned technology company.
Committee membership key:
A Audit and Risk Committee Member A Committee Chair N Nomination Committee Member N Committee Chair R Remuneration Committee Member R Committee Chair
BCA Marketplace plc Annual Report and Accounts 2018 53 EXECUTIVE CHAIRMAN’S GOVERNANCE STATEMENT
Governance within BCA is central to the environment within which the Board operates. I have held the role of Executive Chairman since July 2014. The Board has discussed my combined role and it remains satisfied, as set out on pages 55 and 57, that it is appropriate for me to continue to hold this combined role. Apart from this provision of the Code, I am pleased to confirm that, for the period under review, we complied with the remaining provisions of the Code.
The Code recommends that an evaluation of the effectiveness of the Board and its Committees is conducted annually and that this process is facilitated externally at least every third year. This year the evaluation process was carried out internally and required each Director to respond to a series of questions and to add comments where they considered them to add clarity and be helpful. The process considered the Board and its Committees’ composition, strengths and weaknesses, range and balance of skills, experience, independence and knowledge of the Company, diversity (including gender diversity), how the Board works together as a unit, the effectiveness of the Chairman of the Board and of each Committee, risk management, succession planning and any training issues. The Board has considered the results of these evaluations and noted that there is a high degree of confidence across the Board and its ‘’Good governance remains a priority Committees in the practices and procedures currently in use whilst acknowledging the ongoing need to focus on communication and for the Board’’ the provision of information to the Board as the business continues to grow and develop. Avril Palmer-Baunack Executive Chairman As referred to in my statement on page 2, in December 2017 Mark Brangstrup Watts and James Corsellis resigned as Non-Executive Directors of the Company. As described in the Dear Stakeholder Nomination Committee’s report on page 57, the Committee and On behalf of the Board, I am pleased to present the Board as a whole, discussed whether additional Independent our Governance report for the financial year ended Non-Executive Directors should be added to the Board following 1 April 2018. As Executive Chairman, it is my these resignations. After due consideration, the Directors concluded responsibility to ensure that the Group is, and that the Board continued to display a well-balanced array of skills continues to be, governed and managed with and remains well-attuned to the Group’s requirements and therefore, transparency and in the best interests of stakeholders. at this stage, no additional Independent Non-Executive Director’s would be sought. This decision will be reviewed from time to time Prior to the Company’s move to the Premium Listing should the Group’s requirements change. I confirm that following a it was not formally required to comply or explain any formal performance evaluation of the Independent Non-Executive non-compliance with the UK Corporate Governance Directors’ performance, I am satisfied that their individual Code (April 2016) (the ‘Code’). Notwithstanding, performance continues to be effective and demonstrates the Company has always been committed to, and commitment to the role. recognised the value and importance of, high standards of corporate governance and complied as We are committed to maintaining an active dialogue with our far as appropriate with the Code. In the past 12 months shareholders and will hold our AGM on 6 September 2018 at the the Board has continued its drive to improve the offices of Bryan Cave Leighton Paisner LLP, Adelaide House, existing governance structures and to enhance its London Bridge, London EC4R 9HA. internal control systems, policies and procedures to ensure they are appropriate for a company of our size and complexity.
In October 2017 the Company moved from the Avril Palmer-Baunack Standard to the Premium Listing of the Official List Executive Chairman and qualified for inclusion in the FTSE 250 from 27 June 2018 18 December 2017. Accordingly, whilst the Company has a Premium Listing it is required to comply or explain any non-compliance with the Code as amended from time to time. A full version of the Code can be found on the Financial Reporting Council’s website frc.org.uk.
54 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
GOVERNANCE REPORT
The role of the Board The Company is controlled by the Board of Directors on behalf of the shareholders and the Board provides leadership. Matters reserved for the Board include setting strategy, approving budgets and financial statements and setting up key policies. Other matters are delegated to the Board Committees. Day-to-day operational matters are delegated to the Executive Directors and the Group’s businesses through the divisional leaders. The Board held ten full meetings in the year to 1 April 2018 and attendance is summarised on page 56. Board meetings consider business and financial performance, updates on key initiatives, strategy, reports from committees of the Board and shareholder communications and feedback.
In addition, the Board receives regular updates on the performance of the business, operational matters and legal updates from the Executive Chairman and the Chief Financial Officer.
Board composition At the date of this report, the Board consists of four Independent Non-Executive Directors, including the Senior Independent Non- Executive Director, and two Executive Directors, including the Executive Chairman. Accordingly, the Group meets the Code’s requirement that at least half of the Board should comprise Independent Non-Executive Directors.
As referred to on page 54, The Code recommends that the role of Chairman and Chief Executive should not be exercised by the same individual. Notwithstanding this recommendation, the role of Executive Chairman continues to be held by Avril Palmer-Baunack. This matter has been considered extensively by the Board and also by the Company’s Sponsor in preparation for the move to the Premium List. Avril has significant and unique expertise, knowledge and industry relationships in the UK and Europe which continue to contribute to the successful acquisition, integration and management of businesses by the Company in accordance with its stated strategy to develop a range of automotive service solutions that enable the Group to add value along the vehicle supply chain. In light of this proven expertise and depth of knowledge, the Board continues to believe that combining the roles of Chairman and Chief Executive remains the right approach at this stage in the Group’s development and is in the best interests of the Company and its shareholders.
Committees of the Board The Board has three Committees, namely the Audit and Risk Committee, the Remuneration Committee and the Nomination Committee, to carry out certain tasks on its behalf. The terms of reference for each Committee are available on the Company’s website (www.bcamarketplaceplc.com) under Corporate Governance and from the Company Secretary on request.
Audit and Risk Nomination Remuneration Role and terms of reference Reviews and reports Reviews the structure, Responsible for all to the Board on the size and composition elements of the Group’s financial and of the Board and remuneration of the narrative reporting, its Committees and Executive Directors internal controls and makes appropriate risk management recommendations to systems, compliance, the Board. Considers whistleblowing and succession planning for fraud, internal audit the Executive Directors and external audit Chairman Jon Kamaluddin David Lis Stephen Gutteridge Member Stephen Gutteridge Stephen Gutteridge Piet Coelewij Piet Coelewij Jon Kamaluddin David Lis David Lis Committee report on pages 65 57 58
The Chairman of each Committee provides a report or update of each meeting of the respective Committee to the Board at the subsequent Board meeting.
The structure and the Chairmen of the Nomination and Remuneration Committees were revised on the Company’s transfer to the Premium Listing.
BCA Marketplace plc Annual Report and Accounts 2018 55 GOVERNANCE REPORT continued
Board and Committee membership and attendance The attendance of Directors at Board and Committee meetings of which they were members from 3 April 2017 to 1 April 2018 is set out below: Full Board Audit and Risk Remuneration Nomination Total number of scheduled meetings 10 3 2 1 Avril Palmer-Baunack 10 * * * Tim Lampert 10 * * * Stephen Gutteridge 10 3 2 1 Piet Coelewij 10 3 2 – Jon Kamaluddin 10 3 – 1 David Lis 10 3 2 1 Mark Brangstrup Watts1 6 of 7 2 of 2 – – James Corsellis2 6 of 7 2 of 2 – –
1 Mark Brangstrup Watts ceased to be a Director of the Company on 22 December 2017 2 James Corsellis ceased to be a Director of the Company on 22 December 2017 * Avril Palmer-Baunack and Tim Lampert may attend these meetings by invitation
The Board also held a number of further meetings to discuss and approve procedural matters.
Biographies of all the members of the Board appear on pages 52 to 53.
Advice and support The Directors may take independent professional advice at the Company’s expense provided that they give notice to the Executive Chairman.
Board evaluation Knowing where the Board performs well and where it can improve is a key part of ensuring ongoing improvement and effectiveness. An evaluation of the Board and its Committees was carried out prior to the Company’s admission to the Premium List and has also been carried out subsequently as referred to on page 54. A thorough review of the Board’s processes, practice and culture will continue to be conducted on an annual basis.
Relations with shareholders The Board is committed to providing good communication channels with shareholders. The Executive Directors are in regular contact with our main shareholders to ensure their views on the Company are known and discussed. We aim to keep shareholders abreast of Group developments through press releases and trading and other statements, together with formal reporting of the interim and full year results. We host shareholder visits to our operations, to enable shareholders to gain a better understanding of our business, and undertake investor roadshows. An investor relations report is presented at Board meetings to ensure all aspects of shareholder communication, changes in holdings and price movements are discussed. The Company’s website offers a readily available source of Company information, from trade press releases to formal Stock Exchange announcements and other key financial documents. The Directors will be in attendance at the AGM.
56 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
NOMINATION COMMITTEE REPORT
Following the resignations of James Corsellis and Mark Brangstrup Watts in December 2017, the Committee considered whether additional Independent Non-Executive Directors should be sought. Following an objective assessment of the Group’s needs and strategy and the Board’s current skills and experience, the members of the Committee considered that the Board continued to display a well-balanced array of skills and remains well-attuned to the Group’s requirements. Therefore, the Committee agreed that, at this time, no additional Independent Non-Executive Directors need be sought. This view was supported by the Board as a whole.
The Committee has also reviewed the composition of the three Committees of the Board. After some limited changes, again with the support of the Board as a whole, the membership of all three Committees, as shown on page 55, fulfil the requirements of the Code being comprised of wholly Independent Non-Executive Directors.
Board induction and training An induction programme is arranged for new Non-Executive Directors. This programme includes a comprehensive pack of Dear Stakeholder information on the Group, meetings with senior management I am pleased to provide the report of the Nomination Committee and other Board members, visits to a number of the Group’s sites for 2018. and briefings to share the Group’s strategy.
Prior to my appointment in October 2017, the Committee was The Directors have access to ongoing training as required. Prior to chaired by James Corsellis. Whilst not an Independent Non- the Company’s admission to the Premium List, the Directors Executive Director, James provided continuity of knowledge of the received a training update from the Company’s external legal strategic direction of the Group and of the acquired businesses adviser on the requirements and obligations associated with being from its Admission to the Main List and was supported by four a director of a Premium Listed company. Independent Non-Executive Directors. Following James Corsellis’ resignation in December 2017, the Committee is now comprised of On the recommendation of the Committee all Directors will offer three Independent Non-Executive Directors and is in compliance themselves for re-election at the forthcoming AGM. with the Code.
We have discussed the combined role of Chairman and Chief Executive held by Avril Palmer-Baunack since July 2014. Although the Code recommends these roles should not be held by the same person, the Committee, with the support of the Board, is satisfied David Lis for the reasons set out on page 55, that it is appropriate for Avril to Chairman, Nomination Committee continue to hold the combined role of Executive Chairman. 27 June 2018
The purpose of the Committee is to ensure that there is a formal and transparent procedure for the appointment of new Directors to the Board. Our duties include reviewing the Board’s structure, size and composition, including the skills, knowledge and experience the Board has and may need. Following this review we then make appropriate recommendations to the Board, taking into account succession planning for Directors, the Group’s challenges and opportunities with due regard to the benefits of diversity. Our policy is to ensure that the best candidate is selected to join the Board and this approach will remain in place going forward, without prescriptive or quantitative targets.
The members of the Committee are shown on page 55. The Committee is comprised of three Independent Non-Executive Directors. The Executive Directors attend the Committee by invitation where it is appropriate for them to do so.
BCA Marketplace plc Annual Report and Accounts 2018 57 REMUNERATION COMMITTEE REPORT Annual statement by the chairman of the Remuneration Committee
The Group has reported another year of strong growth and exceeded the performance targets for the annual incentive scheme. Accordingly, the Executive Directors will receive their full entitlement to their annual bonus award.
The Annual report on remuneration which provides details of Directors’ remuneration for the year is set out on pages 59 to 62.
The Committee met twice during the year and, in March 2018, in line with the Policy, the Committee reviewed the salaries of the Executive Directors to ensure that they remain competitive and appropriate to the roles performed. Avril Palmer-Baunack’s salary had not been reviewed since the acquisition of the BCA Group in April 2015 and Tim Lampert’s salary had not been reviewed since his appointment as a Director in September 2015. During the year, the Company has moved to the Premium Listing on the Official List of the London Stock Exchange and is now included in the FTSE 250. In proportion with the additional responsibilities associated with this move, and in line with the growth of the Group, the Committee has increased the annual salary of Avril Palmer-Baunack to £525,000 (2018: £485,000) and of Tim Lampert to £390,000 (2018: £320,000). There will be no change to the annual incentive Dear Stakeholder scheme, which will continue to offer a maximum payment On behalf of the Board, I am pleased to present the Remuneration of 100% of annual salary based on the Group’s underlying Committee’s report for the year ended 1 April 2018. profitability. Pension contributions have been set at 20.0% for Avril Palmer-Baunack and 16.6% for Tim Lampert (2018: 15.5% I was appointed as Chairman of the Remuneration Committee in and 16.1% respectively). October 2017. Prior to my appointment the Committee was chaired by Mark Brangstrup Watts. Whilst Mark was not classed as an Fees for Non-Executive Directors for the forthcoming year have Independent Non-Executive Director, it was agreed by the Board also been reviewed in recognition of the additional responsibilities that he should remain as Chairman of the Committee as he described above. The Senior Independent Non-Executive Director provided continuity of knowledge having been with the Company and other Non-Executive Directors will receive fees of £100,000 from its admission to the main list in 2015. During this period Mark and £54,125 respectively (2018: £50,000 for all Non-Executive was supported by four Independent Non-Executive Directors. Directors). All Non-Executive Directors will continue to receive an Following Mark’s resignation in December 2017, the composition additional £10,000 for responsibilities as chair of each sub-Committee of the Committee was reviewed and is now comprised of three (2018: £10,000). Independent Non-Executive Directors, which is in compliance with the Code. When the changes in respect of the Executive Directors were made, the Committee comprised the Non-Executive Directors in We continue to operate under the 2016 remuneration policy office at 27 March 2018. The increases in respect of Non-Executive (the ‘Policy’) which aims to motivate the Directors in a manner Directors’ fees were decided by the Executive Directors. consistent with the objectives of the shareholders. The H.I.J. scheme, which represented the long-term incentive component of During the year there have been no payments made to past the remuneration policy, was exercised in full in December 2017, as directors and no payments made for loss of office. explained below. The Committee is considering an appropriate structure for a new incentive scheme and has communicated with the Executive Directors that it will make proposals in due course. In all other respects, the Committee will continue to apply the existing Policy for the forthcoming year, a summary of which is set Stephen Gutteridge out on pages 63 to 64. Chairman, Remuneration Committee 27 June 2018 On 18 December 2017, all participants in the H.I.J. scheme exercised their rights under the scheme, having satisfied their performance conditions in full. In accordance with the scheme’s terms the Company issued 24,009,071 1 pence Ordinary shares in aggregate to those participants. The exercise of this scheme represented a milestone in the Group’s development, from its inception in July 2014, the acquisition of BCA in April 2015 and the increase in shareholder value created over the scheme’s lifetime. At the date of this report, the Executive Directors continue to hold shares of at least the level they received upon exercise of the scheme and remain wholly committed to the continued success of the Group.
58 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
ANNUAL REPORT ON REMUNERATION
The information provided in this Annual report on remuneration, on pages 59 to 62, is subject to audit except where indicated otherwise.
Executive Directors’ remuneration
For the year ended 1 April 2018 For the year ended 2 April 2017 Long-term Taxable Annual incentive Taxable Annual Salary benefits1 incentives scheme2 Pension3 Total Salary benefits1 incentives Pension3 Total £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Avril Palmer-Baunack 485 64 485 28,683 75 29,792 485 53 485 75 1,098 Tim Lampert 320 47 320 2,516 52 3,255 320 40 320 52 732
1 The Executive Directors each had use of a fully expensed company car and received private medical insurance and life insurance 2 Relating to the H.I.J. scheme. The values shown represent the issue of 13,688,283 1 pence Ordinary shares in the Company to Avril Palmer-Baunack and 1,200,460 to Tim Lampert 3 Includes amounts paid into money purchase personal pension plans and taxable payments made in lieu of pension contributions
Annual incentive scheme The Executive Directors participate in an incentive scheme, payable in cash, in which the minimum annual incentive payable is nil and the maximum is 100% of relevant salaries. The Committee based the incentives entirely on the achievement of Group profitability targets. This target was chosen as Group profitability is currently identified as the key driver to shareholder value and the most appropriate measure of annual performance. The details of the Group profitability targets are commercially sensitive, and will remain so, and for this reason cannot be disclosed. For the year ended 1 April 2018, the target was achieved in full (2017: target achieved in full).
Non-Executive Directors’ remuneration For the year ended 1 April 2018 For the year Long-term ended incentive 2 April 2017 Fees scheme3 Total Fees £’000 £’000 £’000 £’000 Stephen Gutteridge 55 – 55 50 Piet Coelewij 50 – 50 50 Jon Kamaluddin 60 – 60 60 David Lis1 55 – 55 38 Mark Brangstrup Watts2 37 – 37 50 James Corsellis2 37 – 37 50 Mark Brangstrup Watts and James Corsellis3 – 19,111 19,111 –
1 David Lis was appointed on 28 June 2016 and therefore his remuneration in the comparative year represents the nine months ended 2 April 2017 2 Mark Brangstrup Watts and James Corsellis resigned from the Board on 22 December 2017, and therefore their remuneration for the current year represents the nine months to that date 3 Relating to the H.I.J. scheme. The values shown represent the issue of 9,120,328 1 pence Ordinary shares in the Company to Marwyn Long Term Incentive LP, a partnership in which Mark Brangstrup Watts and James Corsellis have a beneficial interest
Directors’ interest in shares and share options1 Interest in Ordinary Interest in H.I.J. scheme shares at the start and at the start and end end of this year of this year2 At 1 April At 3 April At 1 April At 3 April 2018 2017 2018 2017 number number number number Avril Palmer-Baunack 13,870,135 707,657 – 303,923 Tim Lampert 1,227,692 19,232 – 26,654 Piet Coelewij 86,000 86,000 –– Stephen Gutteridge 30,000 25,000 –– Jon Kamaluddin 25,000 ––– David Lis 100,000 100,000 –– Funds managed by Marwyn Asset Management Ltd3 n/a 20,941,110 n/a – Marwyn Long Term Incentive LP4 n/a – n/a 202,500
1 The Directors’ interests in shares include those of their connected persons 2 There are no other share incentive schemes in operation for the Directors 3 James Corsellis and Mark Brangstrup Watts ultimately own and are Non-Executive Directors of Marwyn Asset Management Limited 4 Marwyn Long Term Incentive LP is a partnership in which James Corsellis and Mark Brangstrup Watts have a beneficial interest
No other Director holds, or held at any time during the year, a beneficial interest in the Company’s Ordinary shares.
BCA Marketplace plc Annual Report and Accounts 2018 59 ANNUAL REPORT ON REMUNERATION continued
Long-term incentive scheme – the H.I.J. scheme The H.I.J. scheme was exercised in full on 18 December 2017, when all participants exercised their rights under that scheme having satisfied its performance conditions. In accordance with the scheme’s terms the Company issued 24,009,071 1 pence Ordinary shares in the Company in aggregate to those participants in exchange for their interests in H.I.J. shares.
The H.I.J. scheme was created prior to the acquisition of the BCA Group to reward Directors for the creation of value for shareholders. In order to make these arrangements most efficient, they were based around a subscription for shares in H.I.J. Limited (‘the H.I.J. shares’), a wholly owned subsidiary of BCA.
The Directors subscribed for H.I.J. shares, which were subject to a number of conditions, as detailed below. Once these conditions were met, the holders of H.I.J. shares were entitled to serve a redemption notice on the Company. The Company had the option to purchase the H.I.J. shares either for cash or for the issue of new Ordinary shares at its discretion, at a value as described below. The Company elected to redeem the H.I.J. shares in exchange for the issue of 24,009,071 1 pence Ordinary shares in the Company.
Growth condition The growth condition required that the compound annual growth rate of the invested capital in the Company was equal to or greater than 10% per annum. The growth condition took into account the date and price at which shares in the Company have been issued and the date and amount of dividends paid by the Company to its shareholders.
Vesting condition The H.I.J. shares were subject to certain vesting conditions, at least one of which had to be, and continued to be, satisfied in order for a holder of H.I.J. shares to exercise their redemption rights. The vesting conditions were as follows: (i) a sale of all or a material part of the business of H.I.J. Limited; (ii) a sale of all of the issued Ordinary shares of H.I.J. Limited occurring; (iii) a winding up of H.I.J. Limited occurring; (iv) a sale or change of control of the Company; or (v) it was later than the third anniversary of AIM Admission (which was 10 November 2014).
The Directors agreed that had they ceased to be involved with the Company in the first three years following AIM Admission then in certain circumstances a proportion of their H.I.J. shares may have been forfeited.
Compulsory redemption If the growth condition had not been satisfied on or before the fifth anniversary of AIM Admission or such later date as the Company and holders of 66% of all the H.I.J. shares agreed, the H.I.J. shares would have been sold to the Company or, at its election, redeemed, in both cases at a price equal to the subscription price per H.I.J. share. Subsequently, upon a sale of the business within a period of one year of the fifth anniversary, which would otherwise have satisfied the conditions, the holders of the H.I.J. shares would have been entitled to receive an amount calculated in accordance with the award.
Redemption value Subject to the provisions detailed above, the H.I.J. shares may be sold to the Company for a proportion of an aggregate value up to the incentive scheme cap.
Under the incentive scheme cap, the value of awards under all of the Company’s share incentive arrangements could not, at the point of vesting or over a ten year period, exceed 10% of the excess of the market value of the Company (based on a 30 day volume-weighted average mid-market price and taking dividends and any prior return of capital into account) over and above the aggregate placing price paid by shareholders for its share capital (the ‘10% growth’).
Other share incentive schemes were in issue at the time that the H.I.J. shares vested. Their value was deducted from the aggregate value of the H.I.J. shares, such that the aggregate value of those arrangements together with the H.I.J. shares did not exceed the 10% growth at the point of vesting.
60 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Awards under the H.I.J. scheme No share incentives have been awarded during the current year. Details of the awards previously made under the H.I.J. scheme, together with their exercise, are shown below: H.I.J. shares Market Participation H.I.J. shares exercised on Number price H.I.J. shares in the Issue Subscription held as at 18 December of Company at date held as at Date of award 10% growth1 price value 2 April 2017 2017 shares issued of exercise3 1 April 2018 11 July 2014 £0.01 £2,025 202,500 (202,500) 15 June 2015 £0.05 £5,071 101,423 (101,423) Avril Palmer-Baunack Aggregate holding 4.85% £7,096 303,923 (303,923) 13,688,283 £2.08 – Tim Lampert 22 October 2015 0.42% £0.07 £1,999 26,654 (26,654) 1,200,460 £2.08 – Marwyn Long Term Incentive LP2 11 July 2014 3.23% £0.01 £2,025 202,500 (202,500) 9,120,328 £2.08 – Total 8.50% 533,077 (533,077) 24,009,071 £2.08 –
1 Other share incentive arrangements were in place during the year, which entitled the holders of those incentive arrangement to 1.5% of the 10% growth. These awards were subsequently exercised on 18 April 2018 and details of these incentive arrangements are disclosed in note 25 to the financial statements 2 Marwyn Long Term Incentive LP is a partnership in which James Corsellis and Mark Brangstrup Watts have a beneficial interest 3 The terms of the H.I.J. scheme prescribed a definition for the valuation of shares in the event that the Company elected to settle the redemption value in shares rather than cash. This measure converted the redemption value using a price per share equal to the 30 day volume weighted average mid-market price of shares traded up to the business day prior to redemption, which resulted in an average price of £2.095 per share. The closing price of a Company share on 18 December 2017, the date of exercise, was £2.08
Long-term incentive schemes There are no current long-term incentive schemes in place for Executive Directors.
The following disclosures in the Annual report on remuneration are not subject to audit
Contracts of service and letters of appointment Notice period Length of service as a director Executive Directors: contracts of service Date of appointment Date of contract (months) at 27 June 2018 Avril Palmer-Baunack 4 July 2014 25 March 2015 121 4 years Tim Lampert 30 September 2015 1 July 2015 121 2 years and 9 months
Non-Executive Directors: letters of appointment Piet Coelewij 27 August 2015 17 August 2015 32 2 years and 10 months Stephen Gutteridge 27 August 2015 10 August 2015 32 2 years and 10 months Jon Kamaluddin 27 August 2015 21 August 2015 32 2 years and 10 months David Lis 28 June 2016 28 June 2016 32 2 years
1 The Company has the option of making a payment in lieu of any unexpired notice period 2 If not re-elected as a Director at an AGM the appointment is terminated with immediate effect and without compensation. The Non-Executive Directors’ letters of appointment can be viewed at the Company’s registered office, or 15 minutes before or during the AGM
Total shareholder return The chart illustrates the performance of an investment of £100 in the Company’s shares made on 2 April 2015, when the Company acquired the BCA Group and was admitted to trading on the Official List, which has been compared to the performance of the same investment on the same date in the FTSE 250 Index. The Board believes this is the most appropriate broad equity market index with which to compare the Company’s performance. 170
155
140
125
110
95
80
04/15 06/15 08/15 10/15 12/15 02/16 04/16 06/16 08/16 10/16 12/16 02/17 04/17 06/17 08/17 10/17 12/17 02/18 04/18 06/18 BCA Marketplace plc FTSE 250 BCA Marketplace plc Annual Report and Accounts 2018 61 ANNUAL REPORT ON REMUNERATION continued
Executive Chairman’s total remuneration as a single figure The table below sets out the Executive Chairman’s total remuneration as a single figure together with the percentage of their maximum annual and long-term incentive awarded over the same period as the chart above in respect of the Company’s shareholder return.
Year ended Year ended Year ended 1 April 20181 2 April 2017 3 April 20162 Executive Chairman total remuneration (£’000) 29,792 1,098 1,068 Annual incentive award (% of maximum) 100% 100% 100% Long-term incentive award vesting (% of maximum) 100% None None
1 The single figure for total remuneration includes an amount of £28,683,000 representing the value at the point of vesting of the Company’s long-term share incentive scheme that was established in July 2014 prior to the acquisition of the BCA Group to reward Directors for the creation of value for shareholders 2 The single figure for total remuneration is for the year from 2 April 2015, the date that the BCA Group was acquired and the Company was admitted to trading on the Official list, to 3 April 2016. The remuneration of £1,068,000 excludes salary of £62,000 for the three months to 2 April 2015 and the completion bonus of £6,044,000 paid in respect of the acquisition of the BCA Group. This single figure for total remuneration provides a more meaningful comparison of remuneration in respect of the share price performance and is a more meaningful basis for comparison to future years. The single figure for total remuneration for the 15 month period to 3 April 2016 is £7,174,000
Percentage change in remuneration of the Executive Chairman The table below sets out the percentage change in salary, benefits and annual bonus for the Executive Chairman compared to all other employees. Executive Chairman All employees % change in base salary 0.0% 1.5% % change in benefits1 21.1% 0.0% % change in annual bonus 0.0% (5.2)%
1 The increase for the Executive Chairman represents the assessed benefit in respect of a new car and the cost of providing medical and life insurance, rather than any change in the nature of benefits. The change shown for all employees represents the nature of benefits
Relative importance of spend on pay The table below shows the relative importance of spend on pay for all employees in comparison to adjusted EBITDA and distributions to shareholders. Total employee pay includes wages and salaries, pension costs, social security and share based payments.
For the For the year ended year ended 1 April 2018 2 April 2017 £m £m % change Total employee pay1 249.6 222.4 12.2% Adjusted EBITDA2 159.5 135.6 17.6% Distributions to shareholders3 67.3 52.7 27.7%
1 Total employee pay includes IFRS 2 charges and excludes the financial value at the point of exercise of any share incentive schemes 2 Adjusted EBITDA is defined on page 17 3 Distributions to shareholders include interim and final dividends paid and payable in respect of the financial year
Statement of voting at the Annual General Meeting At the 2017 AGM, shareholders voted to approve the Directors’ remuneration report. All resolutions were passed unanimously on a show of hands. The table below shows a summary of the Proxy Forms received by the Registrar, appointing the Chairman of the AGM as proxy.
Directors’ remuneration report Directors’ remuneration policy1 % of % of Number of votes votes cast Number of votes votes cast Number of votes in favour 678,952,254 99.99% 613,664,657 87.22% Number of votes against 89,873 0.01% 89,943,095 12.78% Number of withheld votes 125 – 125 – Total votes cast 679,042,252 100.00% 703,607,877 100.00%
1 The Directors’ remuneration policy was voted on at the 2016 AGM
62 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
REMUNERATION POLICY (UNAUDITED)
The Directors’ remuneration policy (‘the Policy’) was approved by shareholders at the AGM held on 8 September 2016, and took immediate effect. No changes are proposed for the financial year ending 31 March 2019 and therefore shareholders will not be asked to vote on the Policy at the forthcoming AGM.
An extract of the Policy is provided below. The full Policy can be found in the 2016 Annual Report, which is available on our website at www.bcamarketplaceplc.com/investors (Key Corporate Documents).
Remuneration packages for Executive Directors Base salary Purpose and link to strategy Designed to attract, retain and motivate, whilst remaining competitive Operation and performance conditions Takes into account the role performed by the individual and information on the rates of pay for similar jobs in companies of comparable size and complexity Maximum opportunity Salary is reviewed annually and otherwise by exception. The Executive Directors’ salaries for year ending 31 March 2019 are: • Avril Palmer-Baunack: £525,000 • Tim Lampert: £390,000 Performance assessment Salary is reviewed annually with effect from the start of each financial year and is determined by taking account of information on the rates of salary for similar jobs in companies of comparable size and complexity. Any changes to this basic salary are made by taking into account additional responsibilities held by that individual, their performance and inflationary or general pay awards within the Group
Benefits Purpose and link to strategy Designed to provide benefits appropriate to the role, whilst remaining competitive Operation and performance conditions Benefits are provided to the Executive Directors in line with market practice Maximum opportunity Set at a level considered to be commensurate with the role and comparable with those provided in companies of a similar size and complexity Performance assessment Not applicable
Pension Purpose and link to strategy Designed to provide pension benefits commensurate to the role, whilst remaining competitive Operation and performance conditions Executive Directors may elect to receive pension contributions or a cash allowance in lieu of contributions Maximum opportunity Contributions are set at a level which the Remuneration Committee considers to be commensurate with the role and comparable with those provided in companies of a similar size and complexity Performance assessment Not applicable
Annual incentive scheme Purpose and link to strategy Intended to reward for individual achievements and the performance of the Group in the financial year Operation and performance conditions The Remuneration Committee reviews performance against the objectives set under the scheme and determines awards accordingly Maximum opportunity Maximum of 100% of salary Performance assessment The targets against which annual performance is judged are primarily based on the Group’s underlying profitability and can include other strategic objectives
Long-term incentive scheme Purpose and link to strategy Intended to incentivise towards the long-term development of the Group Operation and performance conditions Awards were made in 2014 and 2015 under the H.I.J. scheme which was exercised in full on 18 December 2017. The Remuneration Committee is considering an appropriate structure for a new incentive scheme and has communicated with the Executive Directors that it will make proposals in due course Maximum opportunity Not currently applicable Performance assessment Not currently applicable
BCA Marketplace plc Annual Report and Accounts 2018 63 REMUNERATION POLICY (UNAUDITED) continued
Remuneration packages for Non-Executive Directors Fees Purpose and link to strategy To attract and retain Non-Executive Directors of the appropriate experience and calibre Operation and performance conditions The fees of Non-Executive Directors are determined by the Board based upon comparable market levels. Other than with the previous exception in relation to the H.I.J. share scheme, the Non‑Executive Directors do not participate in the Company’s incentive schemes, and nor do they receive any benefits or pension contributions. The Non-Executive Directors’ fees for year ending 31 March 2019 are: • Senior Independent Non-Executive Director fees: £100,000 • Basic annual fees: £54,125 • Additional annual fees for the responsibility to chair a sub-Committee: £10,000 Maximum opportunity Not applicable Performance assessment Not applicable
Share ownership guidelines There is no minimum shareholding requirement.
Other payments The Committee reserves the right to make payments outside the Remuneration policy in exceptional circumstances. The Committee would only use this right where it believes that this is in the best interests of the Company and when it would be disproportionate to seek the specific approval of the shareholders in a general meeting.
Policy for payment on loss of office The service agreements for the Executive Directors allow for lawful termination of employment by making a payment in lieu of notice or by making phased payments over any remaining unexpired period of notice. At the discretion of the Committee, the rationale for which would be fully disclosed in the Annual report on remuneration, a pro-rata annual incentive may become payable at the normal payment date for the period of employment and based on full year performance. The Committee reserves the right to make additional liquidated damages payments outside the terms of the Directors’ service contracts.
Recruitment When hiring a new Executive Director, the Committee will use the Remuneration policy to determine the Executive Director’s remuneration package. To facilitate the hiring of candidates of the appropriate calibre to implement the Group’s strategy, the Committee may include any other remuneration component or award not explicitly referred to in this Remuneration policy sufficient to attract the right candidate.
Outside appointments The Company recognises that Executive Directors may be invited to become Non-Executive Directors of other companies and that this can help broaden the skills and experience of a Director. Executive Directors are permitted to take on other Non-Executive positions with other companies and to retain their fees in respect of such a position.
Upon appointment as the Executive Chairman of the Company Avril Palmer-Baunack was permitted to retain her existing Non-Executive Chairmanship of Redde plc and the associated annual remuneration of £200,000.
On 20 February 2018, Avril Palmer-Baunack was appointed Non-Executive Chairman of Safe Harbour Holdings plc, which is an investment vehicle with an acquisitive growth strategy within the B2B distribution and business services sectors. Safe Harbour Holdings plc has not yet made any acquisitions. The Board is satisfied that the time commitments will have no significant effect on her role at BCA. Avril currently receives fees of £200,000 for her role at Safe Harbour Holdings plc which she is permitted to retain.
Statement of consideration of employment conditions elsewhere in the Group The Group applies the same key principles to setting remuneration for its employees as those applied to the Directors’ remuneration. In setting salaries and benefits each business considers the need to retain and incentivise key employees to ensure the continued success of the Group. Employees of the Group were not consulted in setting the Remuneration policy.
Consideration of shareholder views The Committee considers it extremely important to maintain open and transparent communication with the Company’s shareholders. The views of shareholders received through various avenues, such as at the AGM, during meetings with investors and through other contact during the year, are considered by the Committee and will help to inform the development of the overall Remuneration policy.
64 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
AUDIT AND RISK COMMITTEE REPORT
The Group’s risk management process continues to be a core part of operations in the business. Risks are identified and reviewed at operational, functional and Group levels culminating in a Group risk register, which identifies the risk area, the probability of the risk occurring, the impact if it does occur and the actions being taken to manage the risk to the desired level. The Committee has reviewed the risk management process and the risk register in the year and has deemed the process and the risk mitigations to be appropriate. The principal risks and uncertainties facing the Group are set out on pages 42 to 45.
In respect of financial reporting, monthly consolidated management accounts provide relevant, reliable and up-to-date financial and non-financial information to management and are summarised in the Chief Financial Officer’s report to the Board which analyses the differences between actual and budgeted results on a monthly basis. Annual plans, forecasts, performance targets and long-range financial plans allow management to monitor the key business and financial activities, and progress towards achieving the financial objectives. The annual budget is approved by the Board.
Dear Stakeholder There are formal policies and procedures in place which ensure I am pleased to present the 2018 Audit and Risk Committee report. the integrity and accuracy of the accounting records and serve to safeguard the Group’s assets. These have been reviewed and The Audit and Risk Committee acts on behalf of the Board and on updated during the year, aligning the policies and procedures your behalf as stakeholders, to ensure the integrity of the Group’s across the enlarged Group. There are formal procedures by which financial reporting, evaluate its system of risk management and staff can, in confidence, raise concerns about possible improprieties internal control, and to oversee the performance of the internal in financial administration and other matters, under the Group’s and external auditors. whistleblowing policy.
The Committee membership continues to comply with the UK The Committee receives regular reports from management Corporate Governance Code and related guidance, with all regarding monitoring of these controls, and assures itself that the members being Non-Executive Directors, and following the internal control environment of the Group is operating effectively. resignations of Mark Brangstrup Watts and James Corsellis on 22 December 2017, are now fully Independent. The Committee Internal audit maintains the sound range of financial and commercial expertise The Group has an in-house internal audit function which focuses required to fulfil its role effectively. During the year, the Committee on operational processes and controls. Audits and reviews are has met to consider the interim results announcement, the devised to provide assurance based on both a priority and coverage planning of the audit process and its effectiveness, the Group’s approach as well as using the Group risk register to provide a relationship with the external auditor, compliance with significant risk-based approach. A summary of significant findings from new accounting standards and has undertaken regular reviews of internal audit reviews is discussed by the Committee if applicable. the Group’s internal controls and risk management systems. External support is also available for non-operational specific areas and thematic issues at the request of the Committee. The internal Internal control and risk management systems in relation audit function continues to be monitored to ensure it remains to the financial reporting process effective, appropriately resourced and focused. The Board acknowledges its responsibility for establishing and maintaining the Group’s system of internal controls and delegates Annual Report and Accounts responsibility for monitoring the effectiveness of this to the The Committee met during the year to review and approve Audit and Risk Committee. The Audit and Risk Committee reviews the Annual Report and Accounts for the prior year, the interim the system of internal controls through reports received from financial statements and the audit plan for this Annual Report management, along with others from the external auditor. and Accounts. The Committee has also met once since the year end to approve this Annual Report and Accounts. In reviewing The system of internal controls is designed to manage, rather than the financial statements with management and the auditor, the eliminate, the risk of failure to achieve business objectives and can critical accounting judgements and key sources of estimation and provide reasonable, but not absolute, assurance against material uncertainty set out in note 4 to the financial statements have been misstatement or loss. discussed and debated. As a result of our review, the following items have been identified that require particular judgement or have significant potential impact on the interpretation of this Annual Report and Accounts:
BCA Marketplace plc Annual Report and Accounts 2018 65 AUDIT AND RISK COMMITTEE REPORT continued
Significant issue How addressed Impairment An impairment review is performed annually on a value in use basis, which requires estimation of future net operational of goodwill cash flows, the time period over which they occur, an appropriate discount rate and an appropriate growth rate. and Consideration has been given to management’s assumptions, in particular in relation to future trading and the current intangible discount rate, used to support the carrying value of goodwill and intangible assets. assets The Committee concluded that the future net operating cash flows and growth rates, being based on the Board approved budget and strategic plan, are appropriate. The Committee were satisfied that no impairment was required. Significant The Board review significant or non-recurring (‘SONR’ as defined on page 17) classification within the Chief Financial or non- Officer’s monthly report. recurring Consideration has been given to management’s classification of items as significant or non-recurring, in particular in items relation to acquisition and other significant items. The Committee have concluded that the definition of SONR remains appropriate and is unchanged from the prior year. Share based Share based payments were valued at inception by calculating the fair value of the share options at the grant date. The payments Group’s defined benefit pension schemes are measured at each reporting period using a number of relevant assumptions. and pension In conjunction with the advice of relevant specialists, consideration was given to the specific circumstances of the benefits arrangements and the requirements of the associated standards in relation to management’s calculation and the presentation of the share based payment and pension arrangements. The Committee concluded that both have been accounted for on a reasonable basis.
Further details of the accounting policies, judgements, estimates and non-GAAP measures are given on pages 84 to 94.
The Committee has reviewed the judgements made in these areas by management and, after due challenge and debate, was content with the assumptions made and the judgements applied.
External audit The Audit and Risk Committee is responsible for monitoring the performance, objectivity and independence of the Group’s auditor PricewaterhouseCoopers LLP (‘PwC’). PwC have been the external auditor to the Company since its formation in 2014 and were also auditor to the acquired BCA Group. In assessing the effectiveness of the external audit process, the Committee has considered:
• the external audit plan, including the key audit risk areas, materiality and significant judgement areas; • the terms of the audit engagement letter and the associated level of audit fees; • management’s feedback on the external audit process; and • the independence of the external auditor including a review of the non-audit services provided.
The Committee, in reviewing the re-appointment of PwC as auditor for the forthcoming year, ensured that any decision was compliant with the Competition and Markets Authority Order 2014. A retender of the external audit firm is required every ten years and the engagement partner has to be rotated every five years. The Group are not required to retender for a further seven years.
On the basis of this, it was concluded that it was in the best interests of the Company to recommend the re-appointment of PwC as auditor for the forthcoming year. The resolution to re-appoint PwC will propose that they hold office until the conclusion of the next AGM at which accounts are laid before the Company, at a level of remuneration to be determined by the Board.
The Audit and Risk Committee has reviewed the remuneration received by PwC for non-audit work conducted during the financial period, which is detailed in note 11 to the financial statements on page 98, and note that there were non-audit fees incurred in the year of £0.6m primarily relating to the Premium Listing. The Group’s policy on non-audit services provided by the external auditor requires pre-approval of all audit and permitted non-audit services, with clear guidance on what services are not permitted. The policy is based on the UK Financial Reporting Council’s Revised Ethical Standard 2016 with prohibited non-audit services including but not limited to, the provision of tax services, internal audit, legal services and any activity that involves making management decisions or designing control and risk procedures. The Group has not received any prohibited services, as categorised by the European Audit Regulation and Directive, from PwC.
Jon Kamaluddin, FCA Chairman, Audit and Risk Committee 27 June 2018
66 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
VIABILITY STATEMENT
As required by section C2.2 of the Code, the Board of Directors has carried out a robust assessment of the future prospects of the Group taking into account the Group’s current position and the principal risks facing the Company.
The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Operating review section on pages 17 to 23. In addition, note 27 to the Group financial statements includes the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and its exposures to credit risk and liquidity risk.
The Group’s business model as described on page 6 has continued to show growth by a combination of organic volume growth, increasing penetration of new and existing services, improved efficiency and the early benefits of synergies from the acquired businesses. The Group’s strategy is explained on page 14. Given the Group’s growth plans we are prepared to accept a certain level of risk in order to remain competitive and to continue operating in ever changing markets. The risks and the actions being taken to manage or mitigate them are explained fully on pages 42 to 45 of this Annual Report and Accounts.
The Group operates a three year plan cycle. It is the period of time the Directors believe they are able to forecast with sufficient certainty and accuracy. A period of three years was therefore determined to be the most appropriate period of time for the viability assessment.
The three-year plan considers the Group’s income statement, cash flows, debt, financial covenants and other key financial ratios over the period.
The three year plan assumes:
• Volumes will continue to grow at a sustainable rate • Inflation will remain in line with the Bank of England (‘BoE’) target of 2-3% • The BoE base interest rate will not change materially • No acquisitions - the acquisition price, financial performance and risk impact cannot be addressed until an acquisition is identified. The risk management of acquisitions is described in the risk management section on page 42
In reaching this assessment the following processes have been undertaken:
• As part of the Premium Listing process, the Board considered and discussed the principal risks which could impact the business over the following three years and how each of these risks were being managed and mitigated • The Board re-assessed these risks, and the management and mitigation of the risks, in the three year strategic review • At the year end, as part of the Board’s approval of the Viability statement, the Board again assessed the principal risks which could impact the business over the following three years and how each of these risks were being managed and mitigated • Stress and sensitivity analysis of the principal risks facing the Group was carried out where appropriate, which involved applying a severe but plausible combination of scenarios to the forecast. This assessment included both qualitative and quantitative analysis. Specific scenarios modelled included: • A volume decline across the business • A failure of the Group’s IT systems preventing the business from buying or auctioning cars during the busiest two auction weeks of the year • An increase of 50 basis points in the BoE base rate resulting in increased interest expense on the Group’s facilities • The Directors regularly monitor the effectiveness of the Company’s risk management and internal control processes via delegation to the Audit and Risk Committee. The monitoring activities are described in the Report of the Audit and Risk Committee on pages 65 to 66.
Based on this analysis and other matters considered and reviewed by the Directors during the year, the Board has a reasonable expectation that the Company and Group have adequate resources to continue in operational existence and meet their liabilities as they fall due over the three year period of their assessment. The going concern basis has therefore been adopted in preparing these financial statements.
BCA Marketplace plc Annual Report and Accounts 2018 67 DIRECTOR’S REPORT
BCA is incorporated and registered in England with registered number 09019615. The address of the Company’s registered office is Haversham House, Coronation Business Park, Kiln Road, Kempston Hardwick, Bedford MK43 9PR.
The Company’s accounting reference date is 31 March and its accounts are prepared to a Sunday within seven days of that date. This Annual Report therefore covers the year to 1 April 2018.
This report has been drawn up and presented in accordance with, and in reliance upon, applicable English Law and the liabilities of the Directors in preparing this report shall be subject to the limitations and restrictions provided by such law. The Directors’ report is designed to inform shareholders and help them assess how the Directors have performed their duty to promote the success of the Company.
Strategic report and corporate governance The Strategic report can be found on pages 1 to 50 and is included by reference into this Directors’ report. The Strategic report sets out the development and performance of the Group’s business during the financial year, the position of the Company at the end of the year, a description of the principal risks and uncertainties facing the Company, indications of future developments in the business and reporting of Greenhouse Gas Emissions. The Group’s Governance report can be found on pages 55 to 56.
Dividend An interim dividend of 2.60p per Ordinary share was paid to shareholders on the Register of members at the close of business on 15 December 2017. The Directors are recommending a final dividend for the year of 5.95p per Ordinary share which together with the interim dividend of 2.60p, makes a total for the year to 1 April 2018 of 8.55p per Ordinary share, amounting to £67.8m in aggregate. Subject to shareholder approval at the AGM on 6 September 2018, the final dividend will be paid on 28 September 2018 to shareholders on the Register of members at the close of business on 14 September 2018 and the shares will become ex-dividend on 13 September 2018.
Powers of the Company Directors The AGM in September 2017 granted the Directors the authority to allot shares up to a maximum nominal amount of £2.6m (being one third of the Company’s issued share capital at that date) plus a further £2.6m in connection with a rights issue. The AGM also granted the Directors the authority to make market purchases of shares up to 15% of the share capital of the Company within prescribed limits.
During the year the Company exercised its authorities and issued 24,009,071 Ordinary shares in satisfaction of the H.I.J. scheme and bought 9,000,000 Ordinary shares.
Share capital The shares in issue at the year end comprised 804,256,263 (2017: 780,247,192) Ordinary shares of £0.01, giving a total nominal value of £8.0m (2017: £7.8m) of which 9,000,000 Ordinary shares were held in Treasury. The total number of Ordinary shares with voting rights was therefore 795,256,263. On 18 April 2018, 2,245,554 Ordinary shares were transferred from Treasury for the purpose of employees’ share scheme allotments. Accordingly, at the date of this report, 6,754,446 shares are held in Treasury and the total number of Ordinary shares with voting rights is 797,501,817. The holders of Ordinary shares are entitled to receive dividends as declared from time to time, and are entitled, on a poll, to one vote per share at general meetings of the Company. Details of the Company’s share capital are shown in note 23 to the Group’s financial statements.
Substantial shareholdings The Directors had been advised of the following interests in the shares of the Company.
As at 27 June 2018 As at 1 April 2018 Substantial shareholders of 3% or more Number of shares % shareholding Number of shares % shareholding Invesco Asset Management 175,331,426 21.98 181,073,687 22.52 Woodford Asset Management 136,477,559 17.11 127,398,856 16.01 Capital Group Co 81,296,702 10.19 110,483,002 14.16 Aviva plc & its subsidiaries 62,297,201 7.82 76,243,921 9.58 AXA Investment Managers 40,834,793 5.12 40,398,923 5.02 Marwyn Asset Management 36,627,104 4.59 32,503,634 4.17 Royal London Asset Management N/A N/A 25,388,400 3.25
It should be noted that these holdings may have changed since being notified to the Company. However, pursuant to Rule 5.1 of the Disclosure and Transparency Rules, notification of any change is not required until the next applicable threshold is crossed.
68 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Directors The Directors of the Company as at the date of this report are named on pages 52 to 53 together with their profiles. All Directors who have served during the year and who remain a Director as at 1 April 2018 will retire and offer themselves for re-election at the forthcoming AGM. The interests of the Directors in the share capital of the Company as at 1 April 2018, the Directors’ total remuneration for the year and details of their service contracts and letters of appointment are set out in the Remuneration Committee report on pages 58 to 64.
With the exception of the interest in the H.I.J. shares disclosed on page 59 which were exercised on 18 December 2017, no Directors have had a beneficial interest in the shares of any subsidiary company.
Directors’ indemnities The Company maintains Directors’ and Officers’ liability insurance, which gives appropriate cover for legal action brought against its Directors and Officers.
Directors’ conflicts of interest The Group has procedures in place for managing conflicts of interest. Should a Director become aware that they, or their connected parties, have an interest in an existing or proposed transaction with the Group, they should notify the Board either in writing or at the next Board meeting. Internal controls are in place to ensure that any related party transactions involving Directors, or their connected parties, are conducted on an arm’s length basis. Directors have a continuing duty to update any changes to these conflicts.
Significant agreements – change of control The Group’s term loan and revolving facility contain customary prepayment, cancellation and default provisions including, if required by a lender, mandatory prepayment of all utilisations provided by that lender upon the sale of all or substantially all of the business and assets of the Group or a change of control. The Company does not have agreements with any Director that would provide compensation for loss of office or employment resulting from a takeover except for any provisions which may cause awards and options granted under such arrangements to vest on a takeover.
Corporate responsibility The Board considers that issues of corporate responsibility are important. The Board’s report, including the Group’s policies on employee involvement and disability, and a statement on Greenhouse Gas Emissions for the Group, is set out in the Corporate responsibility report on pages 46 to 50.
Political donations During the year the Group did not make any donations to any political party or other political organisation and did not incur any political expenditure within the meaning of Sections 362 to 379 of the Companies Act 2006.
Events after the balance sheet date After the balance sheet date, deferred consideration in respect of the Paragon acquisition was paid and shares were issued in respect of the performance based incentive scheme. See note 29.
Disclosures required under Listing Rule 9.8.4 There are no disclosures to be made under Listing Rule 9.8.4.
Annual General Meeting The AGM of the Company will be held at the offices of Bryan Cave Leighton Paisner LLP, Adelaide House, London Bridge, London EC4R 9HA at 9.30am on 6 September 2018.
The resolutions being proposed at the 2018 AGM are general in nature and include the receipt of the Annual Report and Accounts including the Remuneration report, the re-election of all the members of the Board, the re-appointment of the auditor, the renewal for a further year of the limited authority of the Directors to allot the unissued share capital of the Company and the disapplication of pre-emption rights, the renewal of the authority to make off-market purchases and the request for shareholder approval to reduce the notice period for calling general meetings (other than the AGM) to 14 clear days.
Going concern The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out on pages 1 to 50. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Group operating review section on pages 17 to 23. In addition, note 27 to the Group financial statements include the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and its exposures to credit risk and liquidity risk. The Board has set out its Viability statement on page 67 and has therefore continued to adopt the going concern basis in preparing these financial statements.
BCA Marketplace plc Annual Report and Accounts 2018 69 DIRECTORS’ REPORT continued
Auditor PricewaterhouseCoopers LLP has confirmed its willingness to continue in office as auditor of the Group. In accordance with section 489 of the Companies Act 2006, separate resolutions for the re-appointment of PricewaterhouseCoopers LLP as auditor of the Group and for the Directors to determine their remuneration will be proposed at the forthcoming AGM of the Company.
Statement as to disclosure of information to auditors The Directors who held office at the date of approval of this Directors’ report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditor is unaware. Each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.
Responsibility statement of the Directors in respect of the Annual Report and Accounts We confirm that to the best of our knowledge: • the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and • the Strategic report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. • the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the performance, strategy and business model of the Company and Group.
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year. Under the law they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (‘IFRSs') as adopted by the EU and applicable law and have elected to prepare the Parent Company financial statements on the same basis.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of their profit or loss for that period. In preparing each of the Group and Parent Company financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether they have been prepared in accordance with IFRSs as adopted by the EU; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Parent Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility 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.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic report, Directors’ report, Directors’ remuneration report and Corporate Governance Statement that complies with the law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
For and on behalf of the Directors:
Avril Palmer-Baunack Tim Lampert Executive Chairman Chief Financial Officer 27 June 2018
70 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BCA MARKETPLACE PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion In our opinion, BCA Marketplace plc’s Group financial statements and Company financial statements (the “financial statements”): • give a true and fair view of the state of the Group’s and of the Company’s affairs as at 1 April 2018 and of the Group’s profit and the Group’s and the Company’s cash flows for the year then ended; • have been properly prepared in accordance with IFRSs as adopted by the European Union and, as regards the Company’s financial statements, as applied in accordance with the provisions of the Companies Act 2006; and • have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements, included within the Annual Report and Accounts (the “Annual Report”), which comprise: the Consolidated and Company balance sheets as at 1 April 2018; the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated and Company cash flow statements, and the Consolidated and Company statements of changes in equity for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Company.
Other than those disclosed in note 11 to the financial statements, we have provided no non-audit services to the Group or the Company in the period from 3 April 2017 to 1 April 2018.
Our audit approach Overview
• Overall Group materiality: £6,000,000, based on 5% of profit before tax, adjusted for amortisation of acquired intangibles, acquisition related costs and significant or non-recurring items.
Materiality • Overall Company materiality: £410,000, based on 5% of loss before tax adjusted for significant or non- recurring items and intercompany recharges. • Full scope audits performed for two financially significant components; British Car Auctions Limited and
Audit scope We Buy Any Car Limited. • Additional full scope audits performed for BCA Marketplace plc, BCA Central Limited, BCA Vehicle Finance Limited (‘Partner Finance’), and BCA Outsource Solutions Limited. • Audit of certain line items for Walon Limited (part of BCA Automotive business), BCA Fleet Solutions Limited and Key audit matters Paragon Fleet Solutions. • Goodwill and acquired intangibles may be impaired (Group). • Partner Finance debtors may not be recoverable (Group). • Significant or non-recurring items may not be appropriately classified (Group). The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
BCA Marketplace plc Annual Report and Accounts 2018 71 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BCA MARKETPLACE PLC continued
We gained an understanding of the legal and regulatory framework applicable to the group and the industry in which it operates, and considered the risk of acts by the Group which were contrary to applicable laws and regulations, including fraud. We designed audit procedures at Group and component level to respond to the risk, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. We focused on laws and regulations that could give rise to a material misstatement in the group and company financial statements, including, but not limited to, the Companies Act 2006, the Listing Rules, Pensions legislation and UK and European tax legislation. Our tests included, but were not limited to, review of financial statement disclosures to underlying supporting documentation, review of correspondence with legal advisors, review of board minutes, enquiries of management and review of significant component auditors’ work. There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.
We did not identify any key audit matters relating to irregularities, including fraud. As in all of our audits we also addressed the risk of management override of internal controls, including testing journals and evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.
Key audit matters Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
Key audit matter How our audit addressed the key audit matter Goodwill and acquired intangibles may be impaired To assess the risk of impairment we have obtained an Refer to page 107 (note 19) for management’s disclosure understanding of management’s methodology and approach to considering impairment including the identification of CGUs, and As a result of the acquisitions made over the past three years, ensured this approach is consistent with prior periods and IAS 36. significant goodwill of £953.7m and acquired intangibles of £549.7m have been recognised on the balance sheet. There is We performed a detailed review of management’s year-end a risk that these assets are no longer deemed to be recoverable impairment assessment and ensured the calculations were and hence should be impaired. mathematically accurate. In performing this review we have agreed the underlying data on which the assessment is based to Under IAS 36 ‘Impairment of Assets’, all cash generating units other audited information or to approved budgets or forecasts. (CGUs) containing goodwill must be tested for impairment annually. We have assessed the reasonableness of growth assumptions To fulfil this requirement, management perform an impairment used in management’s forecasts by comparing them to historic review on an annual basis for each of its CGUs, along with performance. We considered all assumptions used by management additional impairment reviews whenever an indication of to be reasonable. impairment exists. We performed sensitivity analysis on the impairment assessment The impairment reviews performed by management contain a to understand the extremity of assumptions required in order to number of significant judgements and estimates including revenue “break the model”. We did not identify any indicators of growth rates and discount rates. A change in these assumptions impairment. can result in a material change in the valuation of the assets, and as a result there is a risk that goodwill is no longer deemed to be We have also assessed the adequacy of disclosures made and recoverable and hence should be impaired. assessed compliance with IAS 36.
As a result, assessment of the carrying value of goodwill is a significant risk due to the quantum of the balance and the judgements involved. Partner Finance debtors may not be recoverable For a sample of significant debtors we have tested the outstanding Refer to page 102 (note 15) for management’s disclosure customer balance at the year-end to cash subsequently received to prove the recoverability of the year-end balance, with no issues noted. At 1 April 2018, £148.4m of trade receivables were due from customers under partner finance arrangements. We reviewed the quantum of aged debt and the reasonableness of recovery for significant aged items and tested the aging of the Following the bankruptcy of several customers of Partner Finance debtor report on which management’s provision is based. in recent years, and the material nature of the loan book, there continues to be a risk that amounts owed by financing debtors are We reviewed management’s provisioning policy and ensured this not recoverable. appears reasonable in light of previous write-offs.
We did not identify any customer balances deemed to be irrecoverable which were not already provided by manangement. 72 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Key audit matter How our audit addressed the key audit matter Significant or non-recurring items may not be appropriately To ensure only appropriate amounts are excluded from adjusted classified measures, we have reviewed management’s policy for what kind of Refer to page 94 (note 6) for management’s disclosure item constitutes a significant or non-recurring item. We have then understood that rationale for classification of all material items as The removal of significant or non-recurring items from underlying significant or non-recurring. results metrics is an area of focus for the Financial Reporting Council and therefore deserves an increased focus. We performed detailed testing of material expenses to supporting third party documentation to verify these meet the definition and There is a risk that standard items of expenditure are incorrectly noted no exceptions in our testing. classified in order to better present the underlying trading results of the Group and the adjusted measure used by management. We have evaluated management’s disclosures and are satisfied that adjusted performance measures are reconciled to IFRS measures in the financial statements and the rationale for their use is clearly explained by management.
We determined that there were no key audit matters applicable to the company to communicate in our report.
How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate.
BCA Marketplace delivers a comprehensive range of linked services in the automotive industry. The Group owns and operates the UK’s and Europe’s largest used vehicle exchange and is the UK’s leading provider of vehicle buying services. The Group operates from a number of distinct legal entities across the UK and Europe which are split across four main divisions generating revenue being UK Vehicle Remarketing, International Vehicle Remarketing, Vehicle Buying and Automotive Services. These represent the Group’s operating segments together with Group costs. Central Group services and financial reporting procedures are performed by the UK HQ.
Our scoping considerations for the Group audit were based both on financial information and risk. BCA Limited and We Buy Any Car Limited represent the majority of the trading results for the Group and are individually financially significant based upon the adjusted profit before tax they contribute to the overall trading results. As a result we performed an audit of the complete financial information of both entities providing coverage of 76% of the Group’s adjusted profit before tax. In addition we performed an audit of the complete financial information of BCA Central Limited, BCA Vehicle Finance Limited and BCA Outsource Solutions Limited as a result of the number of individually significant financial statement line items within each of these entities. To provide further coverage on an individual financial statement line item level, we also performed specific audit procedures over property, plant and equipment for Walon Limited within the Automotive Services segment, and trade receivables for BCA Fleet Solutions Limited and Paragon Fleet Solutions.
Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements Company financial statements Overall materiality £6,000,000 £410,000 How we determined it 5% of profit before tax, adjusted for amortisation 5% of loss before tax adjusted for significant or of acquired intangibles and significant or non-recurring items and intercompany recharges. non-recurring items. Rationale for benchmark Based on the benchmarks used in the annual report, We believe that loss before tax is the primary applied profit before tax is the primary measure used by the measure used by the shareholders in assessing shareholders in assessing the performance of the the performance of the entity, and is a generally Group, and is a generally accepted auditing accepted auditing benchmark. benchmark. Profit before tax has been adjusted for items which are not representative of the underlying results of the business and which are therefore adjusted in the reconciliation presented below the income statement.
BCA Marketplace plc Annual Report and Accounts 2018 73 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BCA MARKETPLACE PLC continued
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated across components was between £410,000 and £5,600,000. Certain components were audited to a local statutory audit materiality that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £300,000 (Group audit) (2017: £214,000) and £20,000 (Company audit) (2017: £12,000) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
Going concern In accordance with ISAs (UK) we report as follows:
Reporting obligation Outcome We are required to report if we have anything material to add or We have nothing material to add or to draw attention to. However, draw attention to in respect of the directors’ statement in the because not all future events or conditions can be predicted, this financial statements about whether the directors considered it statement is not a guarantee as to the Group’s and Company’s appropriate to adopt the going concern basis of accounting in ability to continue as a going concern. preparing the financial statements and the directors’ identification of any material uncertainties to the Group’s and the Company’s ability to continue as a going concern over a period of at least twelve months from the date of approval of the financial statements. We are required to report if the directors’ statement relating to We have nothing to report. Going Concern in accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.
Reporting on other information The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006 (CA06), ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as described below (required by ISAs (UK) unless otherwise stated).
Strategic Report and Directors’ Report In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for the year ended 1 April 2018 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
74 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
The directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity of the Group We have nothing material to add or draw attention to regarding: • The directors’ confirmation on page 70 of the Annual Report that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. • The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated. • The directors’ explanation on page 69 of the Annual Report as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the directors’ statement that they have carried out a robust assessment of the principal risks facing the Group and statement in relation to the longer-term viability of the Group. Our review was substantially less in scope than an audit and only consisted of making inquiries and considering the directors’ process supporting their statements; checking that the statements are in alignment with the relevant provisions of the UK Corporate Governance Code (the “Code”); and considering whether the statements are consistent with the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit. (Listing Rules)
Other Code Provisions We have nothing to report in respect of our responsibility to report when: • The statement given by the directors, on page 70, that they consider the Annual Report taken as a whole to be fair, balanced and understandable, and provides the information necessary for the members to assess the Group’s and Company’s position and performance, business model and strategy is materially inconsistent with our knowledge of the Group and Company obtained in the course of performing our audit. • The section of the Annual Report on pages 65-66 describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee. • The directors’ statement relating to the Company’s compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified, under the Listing Rules, for review by the auditors.
Directors’ Remuneration In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006. (CA06)
Responsibilities for the financial statements and the audit Responsibilities of the directors for the financial statements As explained more fully in the Responsibility statement of the Directors set out on page 70, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, 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.
BCA Marketplace plc Annual Report and Accounts 2018 75 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BCA MARKETPLACE PLC continued
Other required reporting Companies Act 2006 exception reporting Under the Companies Act 2006 we are required to report to you if, in our opinion: • we have not received all the information and explanations we require for our audit; or • adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or • certain disclosures of directors’ remuneration specified by law are not made; or • the Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment Following the recommendation of the audit committee, we were appointed by the members of Haversham Holdings plc on 31 October 2014 to audit the financial statements for the year ended 31 December 2014 and subsequent financial periods. The period of total uninterrupted engagement is 4 years, covering the periods ended 31 December 2014 to 1 April 2018.
John Minards (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors St Albans
27 June 2018
76 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
FINANCIAL STATEMENTS
Primary statements 78 Long-term assets 106 Consolidated income statement Note 18: Acquisitions Consolidated statement of Note 19: Intangible assets comprehensive income Note 20: Property, plant and equipment Consolidated statement of changes in equity Consolidated balance sheet Consolidated cash flow statement
Notes to the accounts 84 Capital structure and financing 110 Note 1: General information Note 21: Bank borrowings Note 2: Basis of preparation Note 22: Partner Finance borrowings Note 3: Accounting policies Note 23: Share capital and reserves Note 4: Critical accounting Note 24: Dividends judgements and estimates Note 25: Share based payments Note 5: New standards, amendments and interpretations
Results for the year 94 Pensions and other information 114 Note 6: Segmental reporting Note 26: Pensions and other Note 7: Earnings per share post-retirement benefits Note 8: Operating costs Note 27: Financial instruments – Note 9: Employees and Directors risk management Note 10: Finance costs Note 28: Related party transactions Note 11: Auditor’s remuneration Note 29: Events after the reporting period Note 12: Taxation Note 30: List of Group undertakings
Working capital and provisions 101 Note 13: Cash and cash equivalents Note 14: Inventories Note 15: Trade and other receivables Note 16: Trade and other payables Note 17: Provisions, commitments and contingencies
BCA Marketplace plc Annual Report and Accounts 2018 77 Primary statements CONSOLIDATED INCOME STATEMENT
For the For the year ended year ended 1 April 2018 2 April 2017 Note £m £m £m £m Revenue 6 2,431.5 2,029.7 Cost of sales (1,983.4) (1,624.5) Gross profit 448.1 405.2 Operating costs 8 (360.5) (330.9) Operating profit 6 87.6 74.3 Finance income 0.3 0.4 Finance costs 10 (12.0) (18.3) Profit before income tax 75.9 56.4 Income tax charge 12 (18.9) (15.3) Profit for the year 57.0 41.1
Attributable to: Equity owners of the Parent 56.5 40.9 Non-controlling interests 0.5 0.2 57.0 41.1
Earnings per share from continuing operations attributable to the equity holders of the Parent during the year Basic earnings per share (pence) 7 7.2 5.2 Diluted earnings per share (pence) 7 7.0 5.1
Operating profit: 87.6 74.3
Add: Depreciation and amortisation 6 26.9 25.2 Amortisation of acquired intangibles 6 40.2 38.5 Restructuring costs 6 5.5 – Profit on sale and leaseback 6 (1.7) (5.3) Premium Listing costs 6 1.0 – Acquisition related items 6 – 2.9
Adjusted EBITDA 159.5 135.6
Less: Depreciation and amortisation (26.9) (25.2) Net finance costs (11.7) (17.9) Add: Arrangement fees write-off – 4.9
Adjusted profit before income tax 120.9 97.4
Adjusted earnings per share from continuing operations attributable to the equity holders of the Parent during the year Adjusted basic earnings per share (pence) 7 11.8 9.2 Adjusted diluted earnings per share (pence) 7 11.4 9.1
78 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Primary statements CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the For the year ended year ended 1 April 2018 2 April 2017 £m £m Profit for the year 57.0 41.1 Other comprehensive income: Items that will not be reclassified to the income statement Remeasurements on defined benefit schemes, including deferred tax 6.8 (7.9) Deferred tax on net movements in share based payments 0.5 0.1 Items that may be subsequently reclassified to the income statement Foreign exchange translation 8.1 22.4 Total other comprehensive income, net of tax 15.4 14.6 Total comprehensive income for the year 72.4 55.7
Attributable to: Equity owners of the Parent 71.9 55.5 Non-controlling interests 0.5 0.2 72.4 55.7
BCA Marketplace plc Annual Report and Accounts 2018 79 Primary statements CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity owners of the Parent
Foreign Non- Share Treasury Merger exchange Retained controlling Total capital reserve reserve reserve profit Total interests equity Note £m £m £m £m £m £m £m £m Balance at 3 April 2016 7.8 – 103.6 29.0 1,007.4 1,147.8 (0.2) 1,147.6 Total comprehensive income for the year Profit for the year – – – – 40.9 40.9 0.2 41.1 Other comprehensive income – – – 22.4 (7.8) 14.6 – 14.6 Total comprehensive income for the year – – – 22.4 33.1 55.5 0.2 55.7 Contributions and distributions Share based payments 25 – – – – 1.6 1.6 – 1.6 Dividends paid 24 – – – – (48.4) (48.4) – (48.4) Changes in ownership interests Acquisition of subsidiary with non-controlling interest 18 – – – – (0.6) (0.6) 0.2 (0.4) Total transactions with owners – – – – (47.4) (47.4) 0.2 (47.2) Balance at 2 April 2017 7.8 – 103.6 51.4 993.1 1,155.9 0.2 1,156.1 Total comprehensive income for the year Profit for the year – – – – 56.5 56.5 0.5 57.0 Other comprehensive income – – – 8.1 7.3 15.4 – 15.4 Total comprehensive income for the year – – – 8.1 63.8 71.9 0.5 72.4 Contributions and distributions Share based payments 25 – – – – 2.0 2.0 – 2.0 Shares issued 23 0.2 – – – (0.2) – – – Dividends paid 24 – – – – (55.8) (55.8) – (55.8) Purchase of own shares 23 – (15.4) – – – (15.4) – (15.4) Changes in ownership interests Acquisition of subsidiary removing non-controlling interest 18 – – – – (2.0) (2.0) (0.6) (2.6) Total transactions with owners 0.2 (15.4) – – (56.0) (71.2) (0.6) (71.8) Balance at 1 April 2018 8.0 (15.4) 103.6 59.5 1,000.9 1,156.6 0.1 1,156.7
80 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Primary statements CONSOLIDATED BALANCE SHEET
As at As at 1 April 2018 2 April 2017 Note £m £m Non-current assets Intangible assets 19 1,528.6 1,559.5 Property, plant and equipment 20 131.4 133.3 Deferred tax assets 12 12.0 11.8 Total non-current assets 1,672.0 1,704.6
Current assets Inventories 14 59.1 58.3 Trade and other receivables 15 389.7 337.1 Cash and cash equivalents 13 135.3 84.4 Total current assets 584.1 479.8 Total assets 2,256.1 2,184.4
Non-current liabilities Bank borrowings 21 (256.9) (254.9) Trade and other payables 16 (89.5) (101.9) Net pension deficit 26 (9.7) (17.3) Provisions 17 (16.7) (17.7) Deferred tax liabilities 12 (106.2) (113.3) Total non-current liabilities (479.0) (505.1)
Current liabilities Bank borrowings 21 (70.0) (90.0) Partner Finance borrowings 22 (105.5) (69.0) Trade and other payables 16 (432.7) (358.5) Current tax (10.9) (4.5) Provisions 17 (1.3) (1.2) Total current liabilities (620.4) (523.2) Total liabilities (1,099.4) (1,028.3) Net assets 1,156.7 1,156.1
Equity shareholders’ funds Share capital 23 8.0 7.8 Treasury reserve 23 (15.4) – Merger reserve 23 103.6 103.6 Foreign exchange reserve 23 59.5 51.4 Retained profit 23 1,000.9 993.1 Equity shareholders’ funds 1,156.6 1,155.9 Non-controlling interests 0.1 0.2 Total shareholders’ funds 1,156.7 1,156.1
The financial statements on pages 78 to 123 were approved by the Board on 27 June 2018 and were signed on its behalf by:
Avril Palmer-Baunack Tim Lampert Executive Chairman Chief Financial Officer
BCA Marketplace plc Annual Report and Accounts 2018 81 Primary statements CONSOLIDATED CASH FLOW STATEMENT
For the For the year ended year ended 1 April 2018 2 April 2017 Note £m £m Cash flows from operating activities Profit for the year 57.0 41.1 Adjustments for: Income tax charge 12 18.9 15.3 Net finance costs 11.7 17.9 Depreciation and amortisation 19,20 67.1 63.7 Profit on sale of property, plant and equipment (1.9) (4.5) Loss on sale of intangibles 0.3 0.7 Equity-settled share based payments 2.0 1.6 Retirement benefit obligations – (0.2) Significant or non-recurring items – 2.1 Changes in working capital: Inventories (0.8) (36.8) Trade and other receivables (19.4) (46.4) Trade and other payables 72.7 84.9 Provisions (1.4) (1.1) Cash generated from operations 206.2 138.3 Increase in Partner Finance loan book (35.0) (48.7) Net interest paid (8.3) (8.8) Income tax paid (21.4) (13.3) Net cash inflow from operating activities before acquisition related cash flows 141.5 67.5 Acquisition related cash flows – (3.0) Net cash inflow from operating activities 141.5 64.5
Cash flows from investing activities Purchase of property, plant and equipment 20 (51.8) (53.8) Purchase of intangible assets 19 (11.0) (10.9) Proceeds from sale of property, plant and equipment 40.1 36.6 Acquisition of subsidiary undertakings, net of cash acquired (13.6) (99.6) Net cash outflow from investing activities (36.3) (127.7)
Cash flows from financing activities Purchase of own shares 23 (15.4) – Dividends paid 24 (55.8) (48.4) Proceeds from borrowings 85.0 400.0 Repayments of borrowings (105.0) (335.0) Financing fees paid 21 – (2.9) Proceeds from sale and leaseback of finance leases 6.9 5.8 Payment of finance lease liabilities (7.1) (6.0) Increase in Partner Finance borrowings 22 36.5 28.8 Net cash (outflow)/inflow from financing activities (54.9) 42.3
Net increase/(decrease) in cash and cash equivalents 50.3 (20.9) Foreign exchange on cash held 0.6 2.9 Cash and cash equivalents brought forward 84.4 102.4 Cash and cash equivalents at year end 13 135.3 84.4
82 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Primary statements CONSOLIDATED CASH FLOW STATEMENT continued
NET DEBT RECONCILIATION
For the For the year ended year ended 1 April 2018 2 April 2017 Note £m £m Cash and cash equivalents at year end 13 135.3 84.4 Bank borrowings 21 (326.9) (344.9) Net debt at year end (191.6) (260.5)
For the For the year ended year ended 1 April 2018 2 April 2017 £m £m Net debt at start of year (260.5) (170.7) Cash generated from operations 206.2 135.3 Movement in Partner Finance loan book and borrowings 1.5 (19.9) Net interest paid (8.3) (8.8) Income tax paid (21.4) (13.3) Net capital expenditure (15.8) (22.3) Dividends paid (55.8) (48.4) Acquisitions (13.6) (99.6) Purchase of own shares (15.4) – Payment of finance lease liabilities (7.1) (6.0) Foreign exchange and non-cash items (1.4) (3.9) Financing fees paid – (2.9) Net debt at year end (191.6) (260.5)
The Group definition of net debt excludes the liabilities relating to BCA Partner Finance and finance leases as these are funded under separate asset-backed lending agreements.
BCA Marketplace plc Annual Report and Accounts 2018 83 NOTES TO THE ACCOUNTS
1. General information BCA Marketplace plc (‘BCA’, ‘the Group’ or the ‘Company’), was incorporated in April 2014; its aim was to acquire and manage companies in the UK and European automotive sector. On 2 April 2015, BCA Marketplace plc acquired the BCA Group (‘BCA Group’). This was followed by the acquisitions of SMA Vehicle Remarketing Limited (‘SMA’) on 1 June 2015, Stobart Automotive Limited (‘BCA Automotive’) on 25 August 2015, Ambrosetti (U.K.) Limited (‘Ambrosetti’) on 4 February 2016, Paragon Automotive Limited (‘Paragon’) on 18 July 2016 and Supreme Wheels Direct Ltd (‘Supreme Wheels’) on 31 March 2017. On 21 December 2017 the shares owned by the non-controlling interest in Life on Show Limited were acquired. Details of acquisitions in the current and prior year are discussed further in note 18.
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the ‘Group’). The Parent Company financial statements present information about the Company as a separate entity and not about its Group, and can be found on pages 126 to 131.
The Company is a public limited company, listed on the London Stock Exchange and incorporated and domiciled in the UK with the registered number 09019615. The address of the Company’s registered office is Haversham House, Coronation Business Park, Kiln Road, Kempston Hardwick, Bedford MK43 9PR.
2. Basis of preparation These consolidated financial statements for the year ended 1 April 2018 have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) and IFRS Interpretations Committee (‘IFRS IC’) interpretations as adopted by the European Union (‘Adopted IFRS’) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivatives) at fair value through profit or loss.
The financial statements and the notes to the financial statements are presented in millions of pounds Sterling (‘£m’) except where otherwise indicated.
Judgements made by the Directors in the application of the accounting policies that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 4.
Going concern The Group maintains a mixture of medium-term debt, committed credit facilities, finance lease arrangements and cash reserves, which together are designed to ensure that the Group has sufficient available funds to finance its operations. The Board reviews forecasts of the Group’s liquidity requirements based on a range of scenarios to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its committed borrowing facilities at all times, so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities.
After making appropriate enquiries and having considered the business activities and the Group’s principal risks and uncertainties, the Directors are satisfied that the Company and the Group as a whole have adequate resources to continue in operational existence for the foreseeable future. This conclusion has been reached following the review and approval of the Viability statement. For further information see page 67. Accordingly, the consolidated financial statements have been prepared on a going concern basis.
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Basis of consolidation Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
Losses applicable to non-controlling interests are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.
Intragroup balances, and any gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. Gains arising from transactions with jointly controlled entities are eliminated to the extent of the Group’s interest in the entity. Losses are eliminated in the same way as gains, but only to the extent that there is no evidence of impairment.
Foreign currency translation The functional currency of the Company and the majority of entities within the Group is Sterling because that is the currency of the primary economic environment in which they operate. The Group’s presentation currency is Sterling.
Transactions and balances Foreign currency transactions are translated into the respective functional currency of Group entities using the exchange rates prevailing at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of unsettled monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within finance income or costs. All other foreign exchange gains and losses are presented in the income statement within other income or other operating costs.
Consolidation of Group companies The results and financial position of all Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities including goodwill, intangible assets arising on acquisition and fair value adjustments arising on consolidation for each balance sheet presented are translated at the closing rate at the date of that balance sheet; • income and expenses for each income statement presented are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and • all resulting exchange differences are recognised in other comprehensive income and are accumulated in the foreign exchange translation reserve or non-controlling interest.
On disposal of a foreign subsidiary the cumulative amount of the exchange differences recognised in other comprehensive income and accumulated in the foreign exchange translation reserve is recognised in the income statement when the gain or loss on disposal is recognised.
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3. Accounting policies (a) Revenue Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services supplied, stated net of discounts, returns and value added taxes. The Group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group’s activities, as described below.
Outsourced vehicle auction revenue represents the vehicle sale proceeds obtained when the vehicle is sold and is recognised on the date of sale. It is the customers’ intention for the Group to take legal title of certain vehicles based on contractual agreements with corporates before the vehicle is sold to the end customer through the various remarketing channels.
Vehicle auction revenue represents vendor and buyer fees for vehicles sold by the Group together with fees for related services including transportation, inspection, valeting and mechanical checks. Revenue is recognised at the time the service is provided, which is predominantly at the point the vehicle is sold at auction. Revenue represents the fees for the auction service not the value of the vehicle sold, as the Group does not incur the significant risks and rewards of ownership as part of the transaction.
Interest and loan origination fees earned in respect of the provision of Partner Finance loans are recognised over the term of the funding and are included within revenue. Fees charged by Partner Finance are recognised evenly over the period that the relevant service is provided.
Vehicle buying revenue represents the vehicle sale proceeds obtained when the vehicle is sold and is recognised on the date of sale. Transaction fees charged to vendors of vehicles are recognised on the purchase invoice date and treated as a reduction in the cost of inventory and therefore in the cost of sales.
Revenue for other services, including logistics and automotive services, is recognised once the contracted service has been provided. For transportation or delivery services this is deemed to be when the customer has received the vehicle; for storage services this is deemed to be once an activity has been completed, such as receiving and parking a vehicle, and generally on a daily basis for storage charges; for vehicle repair and vehicle enhancement work this is deemed to be when work has been completed to a stage that can be invoiced to the customer; and for fleet services management this is deemed to be over the period the service is provided on a straight line basis.
(b) Advertising and marketing costs The Group carries out a variety of advertising and marketing activities. These include advertising activities which correlate to the number of vehicles that are acquired by the Group through the Vehicle Buying division and for subsequent sale through the Group’s auctions for which revenue is recognised. These direct advertising costs are therefore recognised as a cost of sale. All other indirect advertising and marketing costs are recognised within operating costs.
The cost of advertising design is expensed as incurred and the expense of advertising campaigns is expensed in the income statement in the period in which the advertising space or air time is utilised.
(c) Net finance costs Finance costs Finance costs comprise interest payable on borrowings, direct transaction costs, unwinding of the discount on provisions, net interest cost of defined benefit pension arrangements and foreign exchange losses on finance balances. Transaction costs are amortised over the life of the debt using the effective interest method.
Finance income Finance income comprises interest receivable on funds invested and foreign exchange gains on finance balances. Interest income is recognised in the income statement as it accrues using the effective interest method.
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(d) Taxation Income tax for the years presented comprises current and deferred tax. Income tax is recognised in income or other comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to taxes payable in respect of previous periods. Current tax assets and liabilities are offset only if certain criteria are met.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of other assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they are unlikely to reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.
(e) Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the cash flow statement.
(f) Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
(g) Inventories Inventories primarily represent vehicles acquired by the Group that have not yet been sold and where the Group has the risk and reward of ownership of such vehicles. Other inventories include vehicle parts. All inventories are stated at the lower of purchase cost and net realisable value. Cost represents expenses incurred in bringing each product to its present location and condition. In the Vehicle Buying division the vehicle cost is net of any administration fees paid to the Group by the seller of the vehicle. Net realisable value is based on estimated normal selling price, less further costs expected to be incurred on completion of the sale and disposal. The UK Vehicle Remarketing division in the ordinary course of business will purchase a vehicle from a vendor in order to complete a sale where a buyer has reneged on the purchase or there was an error in the sales process. This represents between 1% and 2% of UK volume and is considered a cost of business and so the purchase value and subsequent resale value have historically been netted down within cost of sales.
(h) Financial assets Classification The Group classifies its financial assets as loans and receivables. Management determines the classification of its financial assets at initial recognition.
Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that arise principally through the provision of services to customers. They are initially recognised at fair value, and are subsequently stated at amortised cost using the effective interest method, where the impact is material. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. Loans and receivables comprise trade and other receivables and cash and cash equivalents in the balance sheet.
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3. Accounting policies continued Impairment of financial assets Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty, default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms of the receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable discounted at the assets’ original effective interest rate.
For trade receivables, which are reported net of any provisions, such provisions are recorded in a separate provision account with the loss being recognised within operating costs in the income statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
(i) Trade and other payables Trade and other payables are initially stated at fair value and subsequently measured at amortised cost using the effective interest method.
(j) Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, that can be measured reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability. The increase in the provision due to the passage of time is recognised in finance costs.
Property leases and dilapidations Provisions for onerous leases on property are recognised when it is probable that future obligations under the lease will exceed earnings achievable from the property, taking into account the Directors’ estimation of likely income from the subletting of vacant property. The amounts of such net outflows are discounted at the risk-appropriate rate, and are stated net of any anticipated sub-lease income.
Provisions for dilapidations are made in respect of property leases on a lease by lease basis and are based on the Group’s best estimate of the likely committed cash outflow. Where relevant, these estimated outflows are discounted to net present value.
(k) Intangible assets Intangible assets comprise internally generated software, acquired computer software, and intangible assets such as customer relationships and brand arising as part of the assessment of assets on the acquisition of a business. These are carried at cost less accumulated amortisation and any recognised impairment loss.
Costs relating to the development of computer software for internal use are capitalised once all the development phase recognition criteria of IAS 38 are met. Costs incurred before this point are expensed as incurred and are not recognised as an asset in a subsequent period. The assessment identifies unique software products that are controlled by the Group and that will probably generate economic benefits exceeding costs beyond one year. Salary and related employment costs that are directly attributable to the development of the software are then capitalised. When the software is available for its intended use, these costs are amortised in equal annual amounts over the estimated useful life of the software.
Amortisation and impairment are charged to operating costs in the period in which they arise. Amortisation is calculated on a straight line basis from the date on which the assets are brought into use, with useful lives as indicated below:
Customer relationships 12 – 20 years Brand 15 – 25 years Software – Internally generated 3 – 10 years Software – Acquired 3 – 7 years, or the licence term if shorter
Assets acquired through business combinations are amortised over the remaining useful life at acquisition.
Amortisation periods and methods are reviewed annually and adjusted if appropriate. For the Group’s impairment policy on non-financial assets see (m) Impairment of non-financial assets.
(l) Goodwill Goodwill arises on the acquisition of subsidiaries and is recognised initially as the excess of the consideration transferred, over the Group’s interest in fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree. Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units, which are no higher than an operating segment prior to aggregation, and is not amortised but is tested annually for impairment.
An impairment charge is recognised in the income statement for any amount by which the carrying value of goodwill exceeds its recoverable amount. Goodwill that is not denominated in Sterling is retranslated at each balance sheet date.
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(m) Impairment of non-financial assets Goodwill has an indefinite useful life and is not subject to amortisation. As a result it is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired. Other assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (‘cash-generating units’), which are largely independent of the cash inflows from other assets or groups of assets. Non-financial assets other than goodwill that have suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
(n) Property, plant and equipment Owned assets Items of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation and impairment losses. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. When parts of an item of property, plant and equipment have different useful lives, those components are accounted for as separate items of property, plant and equipment. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and when the cost of the item can be measured reliably.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statement.
Assets under construction The costs of assets that are being constructed are capitalised as described in the Owned assets paragraph above. Assets under construction are not depreciated until the asset is deemed to be available for use. For the asset to be available for use it has to be in the location and condition necessary for it to be capable of operating in the intended manner. Once the asset is available for use it is no longer classified as an asset under construction and is instead depreciated like any other item of property, plant and equipment.
Leased assets Leases under which the Group assumes substantially all the risks and rewards of ownership of an asset are classified as finance leases. Property, plant and equipment acquired under a finance lease is recorded at fair value or, if lower, the present value of minimum lease payments at inception of the lease, less depreciation and any impairment.
Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in the other short-term or long-term payables as appropriate. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Assets leased under operating leases are not recorded on the balance sheet. Rental payments are charged directly to the income statement on a straight line basis over the period of the lease. Lease incentives received are recognised as a reduction of rental expense over the lease term, on a straight line basis.
Depreciation Depreciation is charged to the income statement on a straight line basis over the estimated useful lives of each part of an item of property, plant and equipment. Any property, plant and equipment acquired under a finance lease is depreciated over the shorter of the useful life of the asset and the lease term. Freehold land and assets under construction are not depreciated. The rates of depreciation are as follows:
Land and buildings 50 years, or the unexpired lease period if shorter Fixtures, fittings and equipment 2 – 10 years Plant, machinery and motor vehicles 3 – 25 years
Assets acquired through business combinations are depreciated over the remaining useful life at acquisition. The residual values and useful lives are reviewed and adjusted if appropriate, at each balance sheet date. For the Group’s impairment policy on non-financial assets see (m) Impairment of non-financial assets.
(o) Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the expected utilisation of the facility to which it relates.
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3. Accounting policies continued (p) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in share premium as a deduction from the proceeds.
Where the Group purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the Company’s equity holders until the shares are cancelled or reissued. Where such Ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.
(q) Employee benefits Pension obligations The Group operates defined contribution and defined benefit plans.
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
The defined benefit plans operated by the Group in the United Kingdom are closed to new members. The costs of providing benefits under the plans are determined using the projected unit credit actuarial valuation method.
The current service cost is included in operating costs in the consolidated income statement. Past service costs are similarly included where the benefits have vested, otherwise they are amortised on a straight line basis over the vesting period. Administrative scheme expenses associated with the plans are recorded within operating costs when incurred in line with IAS 19. Net interest income or interest cost relating to the funded defined benefit pension plans is included within finance income or finance costs as relevant in the consolidated income statement.
Changes to the retirement benefit obligation or asset due to experience and changes in actuarial assumptions are included in the consolidated statement of comprehensive income, presented as remeasurements of the defined benefit scheme in full in the period in which they arise.
Where scheme assets exceed the defined benefit obligation the net asset is only recognised to the extent that an economic benefit is available to the Group in accordance with the terms of the scheme and where consistent with relevant statutory requirements.
Share based payment transactions The Group operates equity-settled, share based plans. The fair value of the employee services received in exchange for the grant of the awards is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the compensation as determined by independent valuations. Non-market vesting conditions are included in assumptions about the number of awards that are expected to vest.
The cost of equity-settled transactions are recognised, together with a corresponding increase in equity, over the period during which the performance conditions are fulfilled, ending on the date on which the relevant employees are expected to become fully entitled to the award (vesting date).
At each reporting date, the cumulative expense recognised for equity-settled transactions reflects, in the opinion of the Directors, the number of awards that will vest and the proportion of the period to vesting that has expired. Directors’ estimates are based on the best available information at that date.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting, irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.
4. Critical accounting judgements and estimates The preparation of the Group’s consolidated and Parent Company financial statements under adopted IFRS requires the Directors and management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. Accounting policies are reviewed annually for appropriateness. Estimates and judgements are evaluated continually and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates, with any changes arising being recognised in the period in which the change in estimate is made or the final result determined.
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Certain of the Group’s significant accounting policies are considered by the Directors to be critical because of the level of complexity, judgement or estimation involved in their application and their impact on the consolidated financial statements. There were no unusual or significant transactions in the year that required judgement. Existing judgements, where applicable, are contained within the accounting policies. Details of the estimates can be found in the following notes:
Page 98 Note 12 Taxation 104 Note 17 Provisions, commitments and contingencies 106 Note 18 Acquisitions 107 Note 19 Intangible assets 112 Note 25 Share based payments 114 Note 26 Pensions and other post-retirement benefits
5. New standards, amendments and interpretations (a) New and amended standards adopted by the Group
Standard Applicable from Amendments Expected impact Amendment to IAS 7 1 Jan 2017 The amendment introduces an additional disclosure that will The Group has included an Cash flow statements enable users of financial statements to evaluate changes in additional table in note 27 – liabilities arising from financing activities Financial instruments disclosing the movements in liabilities arising from financing activities
No other new standards, amendments or interpretations effective for the first time for the financial year beginning on or after 1 January 2017 have had a material impact on the Group or Parent Company.
(b) New standards and interpretations not yet adopted i. Summarised impact Standards and interpretations which are issued but not yet effective and have not been early adopted by the Group are summarised in the table below. For more detail on the Group’s assessment of the impact of the new standards see (b)ii:
Standard Applicable from Amendments Expected impact IFRS 9 1 Jan 2018 The standard addresses the classification, measurement and The Group has assessed the impact Financial Instruments recognition of financial assets and financial liabilities and as non-significant replaces IAS 39 IFRS 15 1 Jan 2018 The standard combines and supersedes the guidance in The Group has determined that the Revenue from Contracts various standards and interpretations, including, but not new standard will increase revenue with Customers limited to IAS 18 Revenue and IAS 11 Construction Contracts. by less than 5%, but will not impact It establishes a single, comprehensive framework for revenue profitability measures recognition to be applied across industries and for all categories of revenue transactions Amendment to IFRS 2 1 Jan 2018 The amendment clarifies that when tax laws or regulations The performance scheme was Share based payments oblige an entity to withhold an amount for an employee’s tax settled post year end in accordance obligation associated with a share based payment and to with this amendment transfer that amount, normally in cash, to the tax authority on the employee’s behalf, the transaction shall be classified in its entirety as an equity-settled share based payment transaction if it would have been so classified in the absence of the net settlement feature IFRS 16 1 Jan 2019 The standard establishes principles for the recognition, There will be an impact on the Leases measurement, presentation and disclosure of leases, other Group’s financial position and than short-term and low-value assets, and replaces IAS 17 performance. The likely effects Leases. IFRS 16 will result in the recognition of a lease liability are explained following this table and corresponding right of use asset on the Group’s balance sheet in respect of the majority of operating leases. The timing and presentation of charges recognised in the income statement will change, with current operating lease expenses replaced by depreciation of the right of use asset and interest on the lease liability
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5. New standards, amendments and interpretations continued (b) New standards and interpretations not yet adopted continued ii. Detailed Group assessment The Group has performed a detailed exercise to assess the impact of the following new accounting standards on the financial statements.
IFRS 9 Financial Instruments The standard has been reviewed and applied to the financial assets and liabilities currently within the Group. • Financial assets held by the Group are loans and receivables. The majority of trade receivables do not contain a significant financing component and so can be initially recognised at the transaction price as opposed to fair value under IAS 39. Historically there has been no material difference between the transaction price and fair value and no material impact is anticipated. • The impairment criteria for financial assets will be amended from the incurred loss model to the expected loss model. This will result in impairment charges, should they arise, being recognised in the income statement earlier than under IAS 39. Due to the short-term nature of the Group’s financial assets, the impact is expected to be immaterial. • Other changes as a result of the new standard do not affect the Group at present. The most notable changes are the hedge accounting requirements, which allows broader exposures to be hedged and establishes new criteria for hedge accounting that are less complex and more aligned with the way that entities manage their risks than under IAS 39.
An estimate of the quantitative impact of IFRS 9 is not yet possible at this stage, but is not expected to be significant. IFRS 9 will be applied retrospectively, with adjustments to the impairment of financial assets, where applicable, disclosed in a reconciliation with IAS 39. The prior year comparison will not be restated, as it would be impacted by hindsight, which is not permitted under IFRS 9.
IFRS 15 Revenue from Contracts with Customers A Group-wide project to analyse the effects of IFRS 15 has been conducted. Within the scope of the project, contracts with customers have been analysed using the five step model prescribed by IFRS 15. This was to ensure compliance in all divisions across the Group and through all revenue streams. • The Group recognises revenue on both an agency and principal basis dependent on the revenue stream. Whilst the standard sets out new guidance on whether a transaction is agency or principal, this is not expected to change revenue recognition within the Group. • The UK Vehicle Remarketing division in the ordinary course of business will purchase a vehicle from a vendor in order to complete a sale where a buyer has reneged on the purchase or there was an error in the sales process. This represents between 1% and 2% of UK volume and is considered a cost of business and so the purchase value and subsequent resale value have historically been netted down within cost of sales. Applying the five step process prescribed by IFRS 15, the resale will be recognised in revenue, not cost of sales. As a result management expects to make an adjustment on adoption to increase both revenue and cost of sales by between £45m and £70m, with no net impact on gross margin. • The UK Vehicle Buying division offers a faster payment service to vehicle sellers, for which it charges the seller. At present this fee is netted down against the purchase price of the vehicle within cost of sales. Under IFRS 15 this fee is being charged for providing an identifiable service and should therefore be recognised within revenue. As a result management expects to make an adjustment on adoption to increase both revenue and cost of sales by between £1m and £2m, with no net impact on gross margin.
Due to the short-term nature of the majority of transactions in the Group the impact of this standard is limited. IFRS 15 will be applied using the cumulative effect method, with adjustments disclosed in a reconciliation. The prior year comparison will not be restated as it will not add to comparability due to the growth mix of agency and principal revenue within the UK Vehicle Remarketing division.
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IFRS 16 Leases The lessee accounting requirements will not impact on cash payments relating to the leases, but will have an impact on the Group’s financial position and performance. A number of the Group’s properties, transporters and other operational equipment are currently accounted for as an operating lease, but under IFRS 16 a lease liability and right of use asset will be recognised instead. The key impacts are as follows: • Balance sheet – At present, future committed operating lease payments are disclosed in note 17 to the accounts. On adoption the rights and obligations arising from all leases will be recognised as a right of use asset and lease liability on the balance sheet. This is consistent with the current treatment of finance leases. The right of use asset is initially recognised at the present value of future lease payments plus initial direct costs and is subsequently depreciated over the lease term. The lease liability is initially measured at the present value of the lease payments to be made during the term of the lease. On initial recognition the liability will be greater than the asset due to the existing operating lease liabilities, ‘Obligations under operating leases’ and the ‘Onerous lease provision’, being netted against the right of use asset. Following initial recognition, the carrying amount will be increased for the effective interest and reduced by the payments made. • Income statement – Operating lease costs are currently charged to operating costs. Under IFRS 16 the right of use asset will be depreciated and the unwind of the discount on the lease liability will be charged to finance costs. The total impact to the income statement will have no significant impact on our earnings and therefore dividend payout levels, but it will have a favourable significant impact on adjusted EBITDA due to depreciation and finance costs being excluded from this key performance indicator. The most relevant key performance indicator following adoption is therefore also under assessment by management. • Cash flow statement – Under IFRS 16, the repayment of the principal portion of the lease liability will be reflected in cash flows from financing activities and the interest portion will be included in cash flows from operating activities. At present the full operating lease payment is reflected in cash flows from operating activities. Whilst there is no impact on net increase/(decrease) in cash and cash equivalents, it will increase cash flows from operating activities and decrease cash flows from financing activities. • Out of scope leases – Leases under $5,000 or 12 months in length will not be accounted for as described above and will continue to be treated as operating leases, with the cost in operating costs in the income statement and future payments not reflected on the balance sheet. The total cost in the income statement will continue to be disclosed in the operating costs disclosure note. • IFRS 16 will result in expanded disclosures due to the requirements of the standard and also because of the material nature of the leases.
The Group is currently undertaking a project to assess the full impact of the standard and at present it is therefore not possible to quantify the impact. This is in part due to the large number of external leases and potential for changes to, or additional, lease agreements. The Group expects to apply IFRS 16 using the modified retrospective approach and does not intend to adopt early. There are several practical expedients on transition that management are currently considering. On adoption the cumulative adjustment will be recognised in equity.
BCA Marketplace plc Annual Report and Accounts 2018 93 RESULTS FOR THE YEAR
RESULTS FOR THE YEAR The following pages provide information about the financial performance for the year on a segmental and Group basis.
A detailed narrative regarding Group and divisional performance has been provided in the Group operating review section on pages 17 to 23. The key performance indicators, adjusted EBITDA and adjusted earnings per share are presented and defined in notes 6 and 7. These are considered key performance indicators because management use these measures to assess long- and short-term performance of the Group on a periodic basis.
This section also provides details of the primary operating and finance costs, as well as providing analysis on employee related information and taxation.
6. Segmental reporting
Key Performance Indicator – adjusted EBITDA Management uses an adjusted profit measure to monitor the ongoing profitability of the Group, which is defined as Earnings before interest, taxation, depreciation and amortisation (‘EBITDA’) adjusted for significant or non-recurring items (‘SONR'). The significant or non-recurring items that are excluded from EBITDA to calculate adjusted EBITDA are as follows: • acquisition expenses and gains and losses on business combinations, disposals and changes in ownership; • income and expenses that are significant or non-recurring or non-trading in nature, including business closure costs, restructuring costs and onerous lease provisions; • impairment charges and accelerated depreciation and amortisation on property, plant and equipment, intangibles and goodwill; • amortisation of intangible assets arising on acquisition of businesses.
The Directors primarily use the adjusted EBITDA measure when making decisions about the Group’s activities as it is the most reliable and relevant profit measure across all segments. As this is a non-GAAP measure, adjusted EBITDA measures used by other entities may not be calculated in the same way and hence are not directly comparable.
Management has determined the operating segments based on the operating reports reviewed by the Board of Directors that are used both to assess performance and make strategic decisions. Management has identified that the Board of Directors is the chief operating decision maker in accordance with the requirements of IFRS 8 Operating Segments.
The Board of Directors consider the business to be split into the four main revenue-generating divisions: UK Vehicle Remarketing, International Vehicle Remarketing, Vehicle Buying and Automotive Services. Group costs comprise central head office functions and any costs not directly attributable to the segments.
Information on segment assets and liabilities is not regularly reported to the Board of Directors and is therefore not disclosed.
2018 adjusted EBITDA 2017 adjusted EBITDA
21.5 17.2
23.0 19.5
£m £m UK Vehicle Remarketing
98.8 84.0 International Vehicle Remarketing 30.1 26.2 Vehicle Buying Automotive Services
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For the year ended 1 April 2018 Vehicle Remarketing Vehicle Automotive Group UK International Buying Services Costs Total £m £m £m £m £m £m Revenue Total revenue 946.2 156.2 980.5 386.2 – 2,469.1 Inter-segment revenue (4.8) (1.9) – (30.9) – (37.6) Total revenue from external customers 941.4 154.3 980.5 355.3 – 2,431.5
Adjusted EBITDA 98.8 30.1 23.0 21.5 (13.9) 159.5 Depreciation and amortisation (12.5) (3.9) (1.3) (9.1) (0.1) (26.9) 86.3 26.2 21.7 12.4 (14.0) 132.6
Amortisation of acquired intangibles (18.5) (12.1) (5.8) (3.8) – (40.2) Profit on sale and leaseback 1.7 – – – – 1.7 Restructuring costs (2.4) (1.7) – (0.6) (0.8) (5.5) Premium Listing costs – – – – (1.0) (1.0) Operating profit 67.1 12.4 15.9 8.0 (15.8) 87.6 Finance income 0.3 Finance cost (12.0) Profit before taxation 75.9
Capital expenditure 20.8 8.6 1.6 38.7 – 69.7
For further information please see the Group operating review on pages 17 to 23.
Capital expenditure includes the purchase of property and transporters that were subject to a sale and leaseback. Excluding these assets, underlying capital expenditure is £30.6m.
For the year ended 2 April 2017 Vehicle Remarketing Vehicle Automotive Group UK International Buying Services Costs Total £m £m £m £m £m £m Revenue Total revenue 756.7 136.3 837.4 321.2 – 2,051.6 Inter-segment revenue (2.9) (0.9) (0.4) (17.7) – (21.9) Total revenue from external customers 753.8 135.4 837.0 303.5 – 2,029.7
Adjusted EBITDA 84.0 26.2 19.5 17.2 (11.3) 135.6 Depreciation and amortisation (12.5) (3.3) (1.6) (7.7) (0.1) (25.2) 71.5 22.9 17.9 9.5 (11.4) 110.4
Amortisation of acquired intangibles (18.5) (11.5) (5.7) (2.8) – (38.5) Acquisition related items (0.5) 0.3 – 0.7 (3.4) (2.9) Profit on sale and leaseback 5.3 – – – – 5.3 Operating profit 57.8 11.7 12.2 7.4 (14.8) 74.3 Finance income 0.4 Finance cost (18.3) Profit before taxation 56.4
Capital expenditure 30.1 2.9 1.1 36.4 – 70.5
For further information please see the Group operating review on pages 17 to 23.
Capital expenditure includes the purchase of property and transporters that were subject to a sale and leaseback. In the year there was also a one-off purchase of land. Excluding these assets, underlying capital expenditure is £27.6m.
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6. Segmental reporting continued Revenue with external customers in the UK and Ireland represents £2.2bn (year ended 2 April 2017: £1.8bn) of the Group’s revenue, with the other £0.2bn (year ended 2 April 2017: £0.2bn) being generated within Europe. Revenue by type is shown below:
For the For the year ended year ended 1 April 2018 2 April 2017 £m £m Sale of goods 1,633.4 1,284.0 Rendering of services 781.9 734.0 Interest 16.2 11.7 Total revenue 2,431.5 2,029.7
7. Earnings per share Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary shareholders by the weighted average number of Ordinary shares outstanding during the year.
Diluted earnings per share is calculated by adjusting the basic earnings per share to take account of the effect of employee share schemes.
For the For the year year ended ended 1 April 2018 2 April 2017 £m £m Profit for the year attributable to equity shareholders 56.5 40.9
m m Weighted average number of shares used in calculating basic earnings per share 786.2 780.2 Weighted average incremental shares in respect of employee share schemes 21.4 16.5 Weighted average number of shares used in calculating diluted earnings per share 807.6 796.7
Basic earnings per share (pence) 7.2 5.2 Diluted earnings per share (pence) 7.0 5.1
Key Performance Indicator – adjusted earnings per share Adjusted earnings per share is presented in addition to the disclosures required by IAS 33, Earnings per Share, to align the adjusted earnings measure with the performance measure reviewed by the Directors. The Directors consider that this gives a more appropriate indication of underlying performance. Adjusted earnings per share amounts are calculated by dividing net profit for the period attributable to ordinary shareholders, adjusted for significant or non-recurring items and their associated tax impact, by the weighted average number of Ordinary shares outstanding during the period.
For the For the year ended year ended 1 April 2018 2 April 2017 Note £m £m Profit for the year attributable to equity shareholders 56.5 40.9 Add back: Significant or non-recurring items 6, 10 45.0 41.0 Tax credit on significant or non-recurring items (9.1) (9.7) Adjusted earnings 92.4 72.2
m m Weighted average number of shares used in calculating adjusted basic earnings per share 786.2 780.2 Weighted average incremental shares in respect of employee share schemes 21.4 16.5 Weighted average number of shares used in calculating adjusted diluted earnings per share 807.6 796.7
Adjusted basic earnings per share (pence) 11.8 9.2 Adjusted diluted earnings per share (pence) 11.4 9.1
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8. Operating costs
For the For the year ended year ended 1 April 2018 2 April 2017 £m £m Employment costs 146.1 136.6 Operating lease – land and buildings 40.9 37.4 Operating lease – other 3.6 2.2 Depreciation of property, plant and equipment 10.4 8.6 Amortisation of intangible assets 50.6 49.4 Other operating costs 108.9 96.7 Operating costs 360.5 330.9
9. Employees and Directors Staff costs for the Group during the year:
For the For the year ended year ended 1 April 2018 2 April 2017 Note £m £m Wages and salaries 217.2 195.1 Pension costs 4.7 4.6 Social security costs 25.7 21.1 Share based payment expense 25 2.0 1.6 Total gross employment costs 249.6 222.4 Staff costs capitalised (3.4) (4.8) Total employment cost expense 246.2 217.6
Average monthly number of people employed (including Executive Directors) by reportable segment:
For the For the year ended year ended 1 April 2018 2 April 2017 Number Number UK Vehicle Remarketing 2,241 2,324 International Vehicle Remarketing 884 877 Vehicle Buying 550 434 Automotive Services 3,500 3,274 Group 30 26 Total employee numbers 7,205 6,935
The employee numbers reflect the average employee numbers, or where applicable the average number of employees since acquisition. In the prior year the total above therefore includes the average number of people employed by Paragon for the nine months following its acquisition.
Directors’ emoluments For details of Directors’ emoluments see the Annual report on remuneration on pages 59 to 62.
Retirement benefits The Group offers membership of defined contribution schemes in the UK and Europe. The pensions cost in the year to 1 April 2018 was £3.7m (year ended 2 April 2017: £3.7m).
In addition, the Group operates the BCA Pension Plan and the Automotive Plan. The BCA Pension Plan and the Automotive Plan are defined benefit schemes closed to new members. Further information is set out in note 26.
BCA Marketplace plc Annual Report and Accounts 2018 97 RESULTS FOR THE YEAR continued
10. Finance costs
For the For the year ended year ended 1 April 2018 2 April 2017 Note £m £m Interest payable 8.1 9.7 Finance lease interest 1.1 0.8 Net interest expense on retirement benefit obligations 26 0.5 0.3 Unwinding of discount on provisions and non-current liabilities 2.3 2.6 Write-off of arrangement fees – 4.9 Finance costs 12.0 18.3
11. Auditor’s remuneration During the year the Group (including its overseas subsidiaries) obtained the following services from the Group auditor with fees as detailed below:
For the For the year ended year ended 1 April 2018 2 April 2017 £m £m Fees payable to the Group auditor and its associates for the audit of the Parent Company and consolidated financial statements 0.4 0.3 Fees payable to Group auditor and its associates for other services: – The audit of Group subsidiaries 0.8 0.7 – Other services 0.6 0.1 Total auditor's remuneration 1.8 1.1
Included in fees payable to the Group auditor and its associates for the audit of Parent Company and consolidated financial statements is £0.1m (2017: £0.1m) relating to the audit of the Company’s financial statements. Other services in the year primarily reflect the costs in relation to Premium Listing.
12. Taxation
For the For the year ended year ended 1 April 2018 2 April 2017 Current taxation £m £m Current tax on profit for the year 25.4 18.7 Adjustments in respect of prior periods 2.4 (0.1) Total current tax charge 27.8 18.6
Deferred taxation Origination and reversal of temporary differences (7.8) (5.7) Adjustments in respect of prior periods (1.3) 2.7 Changes in recognition of deferred tax 0.2 2.4 Impact of change of UK tax rate – (2.7) Total deferred tax credit (8.9) (3.3)
Income tax charge 18.9 15.3
Critical accounting estimates – taxation Accruals for current tax and amounts payable under local indirect taxes such as sales taxes and VAT are based on management’s interpretation of country specific tax law, and require judgements about the likelihood that tax positions taken will be sustained. Management estimates the amount of taxes payable based upon their analysis and determines whether provision should be made for potential settlement of disputed positions which are under negotiation. Any estimated exposure to interest on tax liabilities is provided for in the related tax amount.
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Current tax The tax charge for the year differs from the standard rate of corporation tax in the UK of 19.0% (year ended 2 April 2017: 20.0%). The differences are explained below:
For the For the year ended year ended 1 April 2018 2 April 2017 £m £m Profit on ordinary activities before tax 75.9 56.4 Profit on ordinary activities multiplied by the rate of corporation tax in the UK of 19.0% (2017: 20.0%) 14.4 11.3
Effects of: Expenses not deductible for tax purposes 2.5 1.3 Income not subject to tax (0.3) (0.4) Reduction in UK tax rate – (2.7) Changes in recognition of deferred tax 0.2 2.4 Effect of different tax rates on profits earned outside the UK 1.0 0.8 Adjustments in respect of prior periods 1.1 2.6 Total taxation charge 18.9 15.3
The Group has operations across Europe, however, the principal location of trading where the majority of business profits are derived is the UK. The effective tax rate has therefore been referenced to the UK corporation tax rate of 19.0% for the year.
Effective tax rate The effective tax rate for the year of 24.9% is higher than the standard rate of corporation tax in the UK as a result of higher income tax rates in Europe, prior year adjustments in the UK and Europe on both current and deferred tax balances, and the impact of permanently disallowable items and provisions charged in the year.
Permanently disallowable items comprise expenditure incurred which does not qualify for a tax deduction in the territory in which it arises. Prior period adjustments relate to changes in the composition of deferred tax assets in the UK which is offset by additional income tax payable in respect of prior periods in Europe.
Excluding the impact of the significant and non-recurring items in the year, the Group has a tax rate of 23.1%. This is in line with the 22.9% effective tax rate estimated in the Interim report for the six months ended 1 October 2017. The Group is routinely subject to audit by tax authorities in the territories in which it operates. Where points are investigated the Group considers each issue on its merits and, where appropriate, holds provisions in respect of the potential tax liability which may arise.
Reductions in the UK corporation tax rate to 19.0% (effective from 1 April 2017) and 17.0% (effective 1 April 2020) were substantively enacted prior to the balance sheet date. This will reduce the Group’s future tax charge accordingly. Deferred tax assets and liabilities reported at the balance sheet date have been measured using a blend of these rates, based on when the relevant tax liability or asset is expected to crystallise.
Management expects the Group’s underlying tax rate to remain in the low-twenties over the short to medium-term, before the anticipated impact of the UK’s future reduction in the corporation tax rate reduces the overall tax rate from 2020 onwards.
Deferred tax
Critical accounting estimates – deferred tax Deferred tax assets and liabilities represent management’s best estimate in determining the amounts to be recognised. When assessing the extent to which deferred tax assets should be recognised, consideration is given to the timing and level of future taxable income.
Property, Operating Losses Share plant and lease Pension carried based equipment obligations deficit forward payments Other Total Deferred tax assets £m £m £m £m £m £m £m At 2 April 2017 2.1 2.6 3.1 3.3 0.4 0.3 11.8 Credited/(charged) to the income statement 1.4 (0.2) – (1.7) 0.4 0.9 0.8 Credited/(charged) to other comprehensive income – – (1.2) – 0.5 – (0.7) Exchange difference – – – – – 0.1 0.1 At 1 April 2018 3.5 2.4 1.9 1.6 1.3 1.3 12.0
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12. Taxation continued
Intangible Pension assets surplus Other Total Deferred tax liabilities £m £m £m £m At 2 April 2017 (112.3) – (1.0) (113.3) Credited/(charged) to the income statement 8.2 (0.1) – 8.1 Charged to other comprehensive income – (0.1) – (0.1) Exchange difference (1.0) – 0.1 (0.9) At 1 April 2018 (105.1) (0.2) (0.9) (106.2)
A deferred tax asset relating to UK tax losses of £3.6m has not been recognised as at 1 April 2018 (2017: £5.2m). Due to the nature of the losses and resulting restrictions on their use it is not expected that the asset will reverse in future periods based on current forecasts.
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WORKING CAPITAL AND PROVISIONS
WORKING CAPITAL AND PROVISIONS This section details the assets and liabilities that are directly generated through the Group’s trading activities. This includes cash and cash equivalents, inventories, trade and other receivables, and trade and other payables. It also includes provisions, commitments and contingencies.
In respect of the Vehicle Remarketing divisions, trade receivables includes the gross auction proceeds due from buyers, regardless of whether the vehicle was owned by the Group. Gross auction proceeds represent the full value of the vehicles sold, not just the fees recognised in the income statement. Correspondingly, trade payables also includes the auction proceeds due to external vendors of vehicles.
Inventories includes vehicles only where the Group holds the risk and rewards of ownership, as detailed in accounting policy (g). This mainly relates to the Vehicle Buying division and outsourced remarketing contracts with the UK Vehicle Remarketing division.
Provisions, commitments and contingencies includes onerous lease provisions, which have arisen in relation to properties and land which are no longer in use, but which have not yet come to the end of their lease contract. It also includes payments which will be made in the future under operating lease agreements.
13. Cash and cash equivalents
As at As at 1 April 2018 2 April 2017 £m £m Cash at bank and in hand 135.3 84.4
Cash and cash equivalents are shown net of overdrafts. The Group has a legal right of offset over specified bank accounts. The gross cash and overdraft balances are shown below:
As at As at 1 April 2018 2 April 2017 £m £m Gross amount of recognised financial assets: Cash at bank and in hand 138.7 91.2 Gross amount of recognised financial liabilities set off in the balance sheet: Overdraft (3.4) (6.8) Cash at bank and in hand 135.3 84.4
14. Inventories
As at As at 1 April 2018 2 April 2017 £m £m Gross inventories 60.9 59.1 Inventory provision (1.8) (0.8) Net inventories 59.1 58.3
Inventories recognised as an expense and charged to cost of sales for the year ended 1 April 2018 were £1,607.6m (year ended 2 April 2017: £1,318.0m). Write-down of inventories recognised as an expense in the year ended 1 April 2018 amounted to £0.1m (year ended 2 April 2017: £0.9m).
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15. Trade and other receivables
As at As at 1 April 2018 2 April 2017 £m £m Trade receivables not past due 276.2 228.2 Trade receivables past due 42.4 49.2 Provision for impairment (2.8) (2.3) Net trade receivables 315.8 275.1 Other receivables 19.4 18.1 Accrued income 31.4 22.2 Prepayments 23.1 21.7 Total trade and other receivables 389.7 337.1
As at 1 April 2018 £148.4m (2017: £113.4m) of trade receivables were due from customers under Partner Finance arrangements and are secured on vehicles held by those customers. Trade and other receivables are presented as current assets and there is no difference between the carrying amount and the fair value. Trade and other receivables are considered past due once they have passed their contractual due date. Movements on the Group provision for impairment of trade receivables are as follows:
As at As at 1 April 2018 2 April 2017 £m £m At start of year (2.3) (2.0) Acquired through business combinations – (0.4) Provision for receivables impairment (1.3) (0.9) Utilisation of provision during the year 0.3 0.7 Unused amounts reversed 0.5 0.3 At year end (2.8) (2.3)
The creation and release of provisions for impaired receivables have been included in operating costs in the income statement.
The ageing of receivables is as follows:
As at As at 1 April 2018 2 April 2017 £m £m Not past due and not impaired 276.2 228.2 Up to 30 days overdue and not impaired 29.3 34.3 Up to 30 days overdue and impaired – 0.6 Past 30 days overdue and not impaired 10.3 12.2 Past 30 days overdue and impaired 2.8 2.1 Total trade receivables 318.6 277.4 Impairment (2.8) (2.3) Net trade receivables 315.8 275.1
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16. Trade and other payables
As at As at 1 April 2018 2 April 2017 £m £m Trade payables 280.5 186.6 Obligations under operating leases 66.1 68.8 Social security and other taxes 21.1 22.6 Accruals and other payables 122.6 151.6 Obligations under finance leases 31.9 30.8 Total trade and other payables 522.2 460.4
Current trade and other payables 432.7 358.5 Non-current trade and other payables 89.5 101.9 Total trade and other payables 522.2 460.4
Obligations under operating leases reflect the fair value of current market terms of operating leases at acquisition, together with the cumulative difference between annual operating lease charges and cash payments made in accordance with the lease agreement. The Group also holds finance leases, further details of which are as follows:
As at As at 1 April 2018 2 April 2017 £m £m The minimum lease payments under finance leases fall due as follows: Not later than one year 8.0 6.7 Later than one year but not more than five 24.6 24.5 More than five years 2.1 2.4 Minimum lease payments – gross 34.7 33.6 Future finance charge on finance leases (2.8) (2.8) Present value of finance lease liabilities 31.9 30.8 Of which: Not later than one year 6.9 5.7 Later than one year but not more than five 22.9 22.7 More than five years 2.1 2.4 Minimum lease payments 31.9 30.8
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17. Provisions, commitments and contingencies Provisions Onerous lease provision Other Total £m £m £m At 2 April 2017 18.3 0.6 18.9 Additional provisions – 0.1 0.1 Utilisation of provision during the year (1.3) (0.1) (1.4) Unused amounts reversed – (0.1) (0.1) Unwinding of discounted amount 0.5 – 0.5 At 1 April 2018 17.5 0.5 18.0
Analysis of maturity profile:
As at As at 1 April 2018 2 April 2017 £m £m Current provisions 1.3 1.2 Non-current provisions 16.7 17.7 Total provisions 18.0 18.9
Critical accounting estimates – onerous lease provision When the present value of the future cash flows receivable from the operation of leased assets is less than the present value of the rental payments to which the Group is committed, the Group provides for any further onerous element of the contract. Determining the amount of such a provision requires estimating the future net cash flows receivable in respect of these assets, and in the particular case where the leased properties are vacant this requires assessing the likely period for which the property will remain vacant, the cost of any works required to enhance its marketability and the rental income receivable when the property is sublet.
Onerous lease provision Prior to the acquisition of the BCA Group two properties in the UK had been identified for which the Group had no future use. A provision exists for the minimum lease payments estimated to be paid until the end of the leases in 2031, net of management’s estimate as to likely revenues receivable in respect of sub-leases or other uses of the properties. The future payments have been discounted, where appropriate, at the risk– appropriate rate of 3%.
Other provisions This balance primarily relates to a dilapidations provision, which was made in order to make good any defects within leasehold buildings used in the business and is expected to be utilised within the next ten years.
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Capital commitments Capital commitments at the year end were £8.6m (2017: £20.3m).
Operating lease commitments The Group leases various properties and other assets under operating lease agreements. The non-cancellable lease terms are between three months and 59 years, and certain of the lease agreements are renewable at the end of the lease period at market rates.
The total future aggregate minimum lease payments under operating leases are as follows:
As at 1 April 2018 As at 2 April 2017
Land and Land and buildings Other buildings Other £m £m £m £m Within one year 45.2 8.1 38.9 7.4 Later than one year and less than five years 160.2 23.4 148.1 17.2 After five years 523.7 1.0 397.0 2.0 Total operating lease commitments 729.1 32.5 584.0 26.6
The Group renegotiated the operating leases of eight UK auction supercentres, extending the lease terms from 2031 to 2042.
The total future aggregate minimum lease payments due to the Group under sub-leases are £0.3m (2017: £0.4m).
Contingencies At any point in time the Company and its subsidiaries may be party to various legal proceedings, some of which may involve claims for damages. The outcome of such proceedings cannot be readily foreseen. Management believes that there are no disputes with any third parties that would result in a material liability for the Group.
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LONG-TERM ASSETS This section outlines the acquisitions made by the Group in the year, as well as the tangible and intangible assets held by the Group.
The Group have made a number of acquisitions since inception. Note 18 describes the acquisitions made in the current and previous years, as well as the key components of each acquisition.
Tangible assets include the physical assets which are used by the Group in the course of business which generate, or contribute to the generation of, revenue and profit. Tangible assets are owned by the Group, or are leased under finance leases. These assets include property and property improvements used by the divisions, equipment used by our employees, and our fleet of transporters and other motor vehicles. The Group also uses other properties, equipment and vehicles which are controlled by the Group through operating leases, detailed in note 17.
Intangible assets are non-physical assets which generate, or contribute to, revenue and profit. These assets include goodwill, customer relationships and brands, acquired through business combinations. This also includes software, which can be purchased, acquired through business combinations, or generated internally based on bespoke requirements and demands in the business. This includes a comprehensive suite of digital tools which are used by internal and external stakeholders to facilitate and coordinate our business activities.
18. Acquisitions
Critical accounting estimates – acquisition accounting For all acquisitions in the period, management are required to apply judgement and make estimates in relation to the identification and valuation of separable assets and liabilities arising on these acquisitions. In determining the period over which the asset is to be amortised, management must also assess the likely economic life of the asset.
Management has estimated the fair value of contingent consideration likely to arise on the acquisition of subsidiary undertakings by taking account of financial and market targets over the relevant period of time. The time value of money was estimated using an appropriate discount rate.
The following step acquisition has been made by the Group in the year.
Life on Show On 21 December 2017 the Group acquired the remaining 49% of the shares in Life on Show Limited (trading as AutosOnShow), specialists in vehicle imagery technology. Consideration paid was £4.0m settled in cash. The Group had previously acquired 51% of the shares in Life on Show Limited in August 2014 and had included the entity within the Group consolidation from this point.
Prior year acquisitions The Group made two acquisitions in the prior year.
In accordance with IFRS 3, there were no final measurement period adjustments required to the provisional values disclosed in the Annual Report and Accounts 2017 relating to the acquisitions listed below.
Paragon On 18 July 2016 the Group acquired 100% of the Ordinary shares of Paragon Automotive Limited and subsidiary companies for initial consideration of £102.7m, which was subject to adjustment based on certain circumstances and contingent earn-out payments of up to a maximum of £30m, subject to achievement of financial and market targets over the two financial years ending March 2017 and 2018. Following the year ended 1 April 2018 the second earn-out payment was paid in line with management estimations at the time of acquisition.
As the leading provider of outsourced vehicle services in the UK, Paragon supplements previous acquisitions and the Group’s services in logistics, refurbishment, imaging, inspection and finance.
Goodwill arising on the acquisition represents the assembled workforce, geographical coverage and buyer synergies from combining the Paragon operations with those of the Group.
Supreme Wheels On 31 March 2017 the Group acquired 75% of the Ordinary shares of Supreme Wheels Direct Ltd for an initial consideration of £1.6m, which was settled in cash. There is a put and call option to purchase the remaining 25% of the Ordinary shares three years after acquisition. Management has provisionally estimated the amount to purchase the remaining shares which, with discounting for the time value of money, represents a fair value of £0.6m.
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19. Intangible assets
Customer Goodwill relationships Brands Software Total £m £m £m £m £m Cost At 3 April 2016 862.0 411.3 162.9 57.1 1,493.3 Acquired through business combinations 73.0 45.1 5.9 0.3 124.3 Additions – – – 10.9 10.9 Disposals – – – (2.2) (2.2) Exchange difference 13.8 9.4 1.6 1.0 25.8 At 2 April 2017 948.8 465.8 170.4 67.1 1,652.1 Additions – – – 11.0 11.0 Disposals – – – (1.6) (1.6) Exchange difference 4.9 3.6 0.6 0.3 9.4 At 1 April 2018 953.7 469.4 171.0 76.8 1,670.9 Accumulated amortisation At 3 April 2016 – 22.6 8.9 12.3 43.8 Charge for the year – 25.2 9.4 14.8 49.4 Disposals – – – (1.5) (1.5) Exchange difference – 0.7 – 0.2 0.9 At 2 April 2017 – 48.5 18.3 25.8 92.6 Charge for the year – 26.5 9.5 14.6 50.6 Disposals – – – (1.3) (1.3) Exchange difference – 0.4 – – 0.4 At 1 April 2018 – 75.4 27.8 39.1 142.3
Net book value At 2 April 2017 948.8 417.3 152.1 41.3 1,559.5 At 1 April 2018 953.7 394.0 143.2 37.7 1,528.6
Amortisation charges have been treated as operating costs in the income statement. Further details of intangible assets acquired through business combinations are disclosed in note 18.
Critical accounting estimates – impairment of goodwill and intangible assets An impairment review has been performed of all goodwill and intangible assets held by the Group. The impairment review is performed on a value in use basis, which requires estimation of future net operating cash flows, the time period over which they will occur, an appropriate discount rate and an appropriate growth rate. Specifically, the future cash flows are sensitive to the assumptions made about the revenue growth, EBITDA margin and the long-term growth rate of the relevant market. Given the degree of subjectivity involved, actual outcomes could vary significantly from these estimates. The detailed assumptions used and associated sensitivity analysis are discussed below.
Goodwill Goodwill acquired in a business combination is allocated to the cash generating unit (‘CGU') or group of CGUs that are expected to benefit from the synergies associated with that business combination. These CGU groups represent the lowest level within the Group at which the associated goodwill is monitored for management purposes. Goodwill is monitored by management at an operating segment level and has been allocated to operating segments as follows:
Goodwill £m UK Vehicle Remarketing 536.5 International Vehicle Remarketing 213.7 Vehicle Buying 115.9 Automotive Services 87.6 953.7
BCA Marketplace plc Annual Report and Accounts 2018 107 LONG-TERM ASSETS continued
19. Intangible assets continued Goodwill is tested annually for impairment, or whenever there is an indication that the asset may be impaired, by comparing the carrying amount of these assets with their recoverable amounts which is derived from a value in use calculation. Where the recoverable amount exceeds the carrying amount of the assets, the assets are considered as not impaired. No impairment charges were incurred in the year ended 1 April 2018.
Cash flow forecasts cover a period of five years following the year end. The first year of forecast is the Board approved budget. The budget forms the basis of the cash flow projections for each CGU which are used to forecast the next four financial years. The forecast reflects management’s expectations of the medium-term operating performance of each CGU and growth prospects in the CGU's markets and regions, and are based on the strategic plan as approved by the Board. The International Vehicle Remarketing forecast contains the highest growth rates amongst the CGUs due to the potential addressable market.
Other key assumptions in the value in use calculation are shown below:
Vehicle Remarketing
UK International Vehicle Buying Automotive Services Growth rate applied beyond approved forecast period 1.8% 1.0% 1.8% 1.0 – 1.8% Pre-tax discount rate 10.3% 11.1% 9.9% 9.5 – 12.4%
Growth rates used do not exceed expectations of long-term growth in the local market.
The discount rate is estimated by the Group using a range of equity costs for similar companies and external market data, with samples chosen where applicable from the same markets or territories as the CGU.
The calculation of value in use for goodwill is sensitive to the following key assumptions: • Operating cash flow • Discount rate
The Directors consider that there are no reasonably possible changes in the key assumptions made in their impairment calculations that would give rise to an impairment.
108 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
20. Property, plant and equipment
Fixtures, Plant, Land and fittings and machinery and buildings equipment motor vehicles Total £m £m £m £m Cost At 3 April 2016 69.3 8.5 44.6 122.4 Acquired through business combinations (0.4) 1.0 7.5 8.1 Additions 20.6 5.4 33.6 59.6 Disposals (16.3) (2.3) (25.1) (43.7) Exchange difference 1.9 – 0.1 2.0 At 2 April 2017 75.1 12.6 60.7 148.4 Additions 12.1 5.2 41.4 58.7 Disposals (18.5) (2.3) (29.6) (50.4) Exchange difference 0.9 – 0.2 1.1 At 1 April 2018 69.6 15.5 72.7 157.8 Accumulated depreciation At 3 April 2016 2.1 1.6 3.2 6.9 Charge for the year 2.2 2.5 9.6 14.3 Disposals (0.1) (2.3) (3.4) (5.8) Exchange difference (0.1) (0.1) (0.1) (0.3) At 2 April 2017 4.1 1.7 9.3 15.1 Charge for the year 2.0 3.5 11.0 16.5 Disposals (0.7) (2.2) (2.4) (5.3) Exchange difference 0.1 – – 0.1 At 1 April 2018 5.5 3.0 17.9 26.4
Net book value At 2 April 2017 71.0 10.9 51.4 133.3 At 1 April 2018 64.1 12.5 54.8 131.4
Land and buildings include an investment property, which has been accounted for using the cost model.
Finance lease commitments Included in property, plant and equipment are land and building assets held under finance leases with a net book value of £3.9m (2017: £5.9m) and accumulated depreciation of £0.8m (2017: £3.8m) and plant, machinery and motor vehicle assets under finance leases with a net book value of £29.3m (2017: £31.8m) and accumulated depreciation of £10.3m (2017: £10.5m).
BCA Marketplace plc Annual Report and Accounts 2018 109 CAPITAL STRUCTURE AND FINANCING
CAPITAL STRUCTURE AND FINANCING This section details the Group’s capital structure and associated distributions. This includes amounts available and utilised in the form of external borrowings. Net debt as defined by the Group represents the external borrowings utilised, less available cash. This does not include Partner Finance borrowings or finance lease liabilities, which are asset-backed facilities and are therefore presented separately.
This section also includes the amounts raised from shareholders in the form of share capital and the capital transactions which have occurred during the year, which include dividends paid. The Group uses share based incentive schemes as part of its overall remuneration policy. These are discussed in more detail in accounting policy (q) and note 25.
21. Bank borrowings
As at As at 1 April 2018 2 April 2017 £m £m Non-current Bank borrowings 256.9 254.9
Current Bank borrowings 70.0 90.0
In February 2017 the Group agreed a £500m multi-currency facility, including a £250m revolving facility and a £250m term loan. The term loan was drawn down in full and £90m of the revolving facility was initially drawn down, net of transaction costs of £2.9m, and used to repay the previous debt facility held within the Group. The facility will run until February 2021 with an option for a further 12 months by mutual consent, with no repayment of the term loan due before that time.
Carrying amounts are stated net of unamortised transaction costs. The transaction costs, together with the interest expense, are being allocated to the income statement over the term of the facility at a constant rate on the carrying amount. The fair value of bank borrowings is equal to the nominal value of the bank loan as the impact of discounting is not significant. The fair value of gross bank borrowings is £328.9m (2017: £347.6m) which is equal to the nominal value. The effective interest rate including the impact of non-utilisation fees on the revolving facility and the utilisation fees for the letters of credit drawn down from the revolving facility, as well as the amortisation of debt issue costs is 2.3% (2017: 3.0%).
The Group’s principal bank loans at 1 April 2018 were denominated in Sterling £276.3m (2017: £296.3m) and Euros €60.0m (2017: €60.0m), and bear variable interest based on LIBOR and EURIBOR respectively. They were secured by a fixed and floating charge over the Group’s present and future assets.
At 1 April 2018, the Group had issued letters of credit in the ordinary course of business of £4.4m (2017: £5.5m) and had drawn down £70.0m (2017: £90.0m) on the revolving facility, leaving the following as undrawn borrowing facilities:
As at As at 1 April 2018 2 April 2017 £m £m Floating rate borrowings Expiring beyond one year 175.6 154.5
For more information about the Group’s exposure to interest rate and foreign exchange risk see note 27.
22. Partner Finance borrowings The Group has an asset-backed finance facility to fund the Partner Finance business. During the year, Partner Finance completed the syndication and extension of the BCA Partner Finance facility, increasing the facility to £200.0m on comparable terms. The amount is advanced solely to a Partner Finance subsidiary in respect of specific receivables. Interest is charged on the drawn down element of the facility at a variable rate of interest, based on the Bank of England base rate. At 1 April 2018 the borrowings were £105.5m (2017: £69.0m).
110 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
23. Share capital and reserves
Number of Nominal Treasury Merger £0.01 value reserve reserve Ordinary shares £m £m £m At 3 April 2016 and at 2 April 2017 780,247,192 7.8 – 103.6 Net proceeds from shares issued 24,009,071 0.2 – – Purchase of own shares – – (15.4) – At 1 April 2018 804,256,263 8.0 (15.4) 103.6
The holders of Ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at meetings of the Company. The movements in share capital are described below: • Net proceeds from shares issued – relate to vesting of share based payments (see note 25). All of these shares rank pari passu with the existing Ordinary shares in issue. • Purchase of own shares – between 21 February 2018 and 27 February 2018 the Company purchased 9,000,000 of its own shares for a total consideration of £15.4m including commission and stamp duty reserve tax.
The following describes the nature and purpose of each reserve within shareholders’ equity:
Treasury reserve The value of the Ordinary shares of BCA Marketplace plc purchased by the Group. These shares do not carry voting rights and are not entitled to receive dividends.
Merger reserve The amount in excess of nominal value of shares issued in exchange for shares on an acquisition in relation to section 612 of the Companies Act 2006.
Foreign exchange reserve Represents the cumulative difference arising from changes to foreign exchange rates upon assets and liabilities of overseas subsidiaries.
Retained earnings Cumulative net gains and losses recognised in the Group income statement.
24. Dividends
Dividend pence per Total Financial year Approved by Description share Register date Payment date £m 2019 AGM on 6 September 2018* 2018 Final 5.95 14-Sep-18 28-Sep-18 47.5 Dividend proposed 47.5 2018 Board meeting on 23 November 2017 2018 Interim 2.60 15-Dec-17 31-Jan-18 20.3 AGM on 7 September 2017 2017 Final 4.55 15-Sep-17 29-Sep-17 35.5 Total dividends paid 55.8 2017 Board meeting on 24 November 2016 2017 Interim 2.20 16-Dec-16 31-Jan-17 17.2 AGM on 8 September 2016 2016 Final 4.00 23-Sep-16 30-Sep-16 31.2 Total dividends paid 48.4 2016 Board meeting on 26 November 2015 2016 Interim 2.00 11- Dec-15 18-Dec-15 15.6 Total dividends paid 15.6
* This dividend has been proposed by the Directors subject to approval by the Shareholders at the AGM
The 2018 final dividend, payable during the year ended 31 March 2019, has been proposed by the Directors and is subject to approval by the shareholders at the AGM. All dividends to date were settled in cash. The total dividend is subject to the number of shares in issue on 14 September 2018.
The distributable reserves of BCA Marketplace plc approximate to the balance of the retained profit of £865.5m as at 1 April 2018. The Company’s reserves are at a sufficient level to provide significant support for future dividends, at over 12 times the current annual dividend. The Company has significant distributable reserves (see Company balance sheet on page 126), and the cash and profits generated by the operating companies in the Group are regularly distributed up the Group by dividends as required.
BCA Marketplace plc Annual Report and Accounts 2018 111 CAPITAL STRUCTURE AND FINANCING continued
25. Share based payments During the year ended 1 April 2018, share based incentives were in place for senior executives within the Group. These arrangements were based around shares in H.I.J. Limited (‘H.I.J.’) and were subject to the Share Incentive Scheme Cap (‘the Incentive Cap’), which restricts the aggregate value of all share incentives in place to a maximum value of 10% of the growth in Shareholder Value, which is broadly defined as the increase in market capitalisation of all Ordinary shares of the Company issued up to the date of vesting, allowing for any dividends and other capital movements.
The Group had the option to settle all incentives in issue either for cash or in exchange for Ordinary shares at its discretion. Throughout their existence it has been assumed that the incentives would be equity settled and the accounting treatment has been applied accordingly.
There were two incentive schemes in place during the year ended 1 April 2018, the H.I.J. scheme (which applies to the Company and the Group) and the Performance based scheme (which applies to the Group only).
(a) The H.I.J. scheme The H.I.J. scheme was subject to both a growth condition and the satisfaction of at least one of the vesting conditions. i. Growth condition The growth condition required that the average compound annual growth of the Company’s equity value must be at least 10% per annum. The growth condition was measured from 10 November 2014, when the Company was admitted to trading on AIM (‘AIM Admission’) and took into account new shares issued, dividends and capital returned to shareholders. ii. Vesting conditions At least one of the vesting conditions must be (and continue to be) satisfied: • a sale of all or a material part of the business of H.I.J. Ltd; • a sale of all of the issued Ordinary shares of H.I.J. Ltd occurring; • a winding up of the H.I.J. Ltd occurring; • a sale or change of control of the Company; or • it is later than the third anniversary of AIM Admission.
(b) The performance based scheme The performance based scheme was subject to the same growth condition and vesting conditions described above and in addition was also subject to further performance conditions. iii. Performance conditions The performance conditions were based on the business’s key performance indicators (‘KPIs') including volumes, average revenue/unit and EBITDA. Under these measures, points accrued over a three year period ending 1 April 2018, which determined the proportion of the scheme to vest, up to a maximum of 1.5% of the growth in Shareholder Value.
Scheme movements The H.I.J. scheme was exercised in full on 18 December 2017. This resulted in the issue of 24,009,071 Ordinary shares, which were issued in exchange for the H.I.J. shares held. At the time of exercise the share price was £2.08. The performance based scheme qualified in full for the 1.50% participation in increase in Shareholder Value and was settled on 18 April 2018, by the transfer of 2,254,554 Ordinary shares held in treasury by the Company, representing the net amount after deduction of income tax and employee National Insurance contributions. No exercise price was payable in respect of these shares, which were issued when the share price was £1.78.
112 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
The share based incentives in issue during the year are shown in the table below. No share based incentives were issued either during the year ended 1 April 2018 or year ended 2 April 2017:
Participation in Number of Participation increase in H.I.J. shares in increase in Subscription Shareholder exercised Shareholder Number of Nominal value value of H.I.J. Value as at 2 during the Value at 1 H.I.J. shares of H.I.J. shares shares April 2017 year April 2018
H.I.J. scheme shares: Issued 11 July 2014 405,000 £4,050 £4,050 6.46% (405,000) 0.00% Issued 15 June 2015 101,423 £1,014 £5,071 1.62% (101,423) 0.00% Issued 22 October 2015 26,654 £267 £1,999 0.42% (26,654) 0.00% Total H.I.J. shares held 533,077 £5,331 £11,120 8.50% (533,077) 0.00%
Performance based scheme: Issued 14 December 2015 n/a n/a n/a 1.50% – 1.50% Total Incentive Cap 10.00% 1.50%
Valuation of share based incentives
Critical accounting estimates – share based payments The key estimates used in calculating the fair value of the options are the fair value of the Company’s shares at the grant date, the expected share price volatility, the risk-free interest rate, the expected life of the instrument and the number of shares expected to vest. The Group’s share based payments were valued at inception by independent valuation experts.
The share based incentives were assumed to be equity-settled and have been accounted for in accordance with IFRS 2.
The value of the services received in exchange for the share based incentives is measured by reference to the fair value of the incentives at their grant date. The fair value is recognised in the consolidated income statement, together with a corresponding increase in shareholders’ equity, on a straight line basis over the vesting period, based on an estimate of the number of shares that will ultimately vest.
Vesting conditions, other than market conditions, are not taken into account when estimating the fair value. Market conditions are those conditions that are linked to the share price of the Group.
At the end of each reporting period the Group revises its estimates of the number of shares that are expected to vest due to non-market conditions. It recognises the impact of the revision to original estimates, if any, in the consolidated income statement, with a corresponding adjustment to shareholders’ equity. At the year end, all outstanding share based incentives were expected to vest in full.
During the year, £2.0m (year ended 2 April 2017: £1.6m) has been recognised in the consolidated income statement as a charge in relation to the share based incentives.
BCA Marketplace plc Annual Report and Accounts 2018 113 PENSIONS AND OTHER INFORMATION
PENSIONS AND OTHER INFORMATION 26. Pensions and other post-retirement benefits The Group participates in several defined contribution schemes and two defined benefit schemes (‘the BCA Pension Plan’ within British Car Auctions Limited and ‘the Automotive Plan’ within Walon Limited).
The BCA Pension Plan provides benefits based on final pensionable salary. The plan is closed to new members. The valuation used for these accounts is based on the results of an actuarial valuation carried out as of 5 April 2017 and updated to the year end date by Capita, independent consulting actuaries, in accordance with IAS 19.
The Automotive Plan provides benefits based on final pensionable salary. The plan closed to future accrual from 1997. The valuation used for these accounts is based on the results of an actuarial valuation carried out as of 5 April 2016 and updated to the year end date by Broadstone, independent consulting actuaries, in accordance with IAS 19.
The defined benefit plans are registered with HMRC and comply fully with the regulatory framework published by the UK pensions regulator. Benefits are paid to the members from a separate fund administered by independent trustees. The BCA Pension Plan has five trustees, three of whom are appointed by the Group and two chosen by scheme members. The Automotive Plan has four trustees, two of whom are appointed by the Group and two chosen by scheme members. The Trustees are required to act in the best interests of the members and are responsible for making funding and investment decisions in conjunction with the Group.
Critical accounting estimates – pensions The Group’s net retirement benefit obligation, which is reviewed by management using assessments from independent actuaries each period, is based on key assumptions, including discount rates, inflation, future salary increases and pension costs. These assumptions may be different to the actual outcome.
The principal assumptions used for the BCA Pension Plan and the Automotive Plan are as follows:
As at 1 April 2018 As at 2 April 2017 BCA Automotive BCA Automotive Rate of increase in salaries 3.20% n/a 3.40% n/a Rate of increase in deferred pensions 2.20% 2.20% 2.40% 2.40% Rate of increase in pensions: LPI (5.0% Cap) 3.10% n/a 3.20% n/a LPI (2.5% Cap) 2.10% n/a 2.15% n/a Fixed 3.00% Nil or 3.00% 3.00% Nil or 3.00% Discount rate 2.60% 2.60% 2.50% 2.50% Rate of inflation: Retail price index 3.20% 3.20% 3.40% 3.40% Consumer price index 2.20% 2.20% 2.40% 2.40%
Assumptions regarding future mortality experience are set based on published statistics and experience.
The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice.
The mortality assumptions adopted imply the following expected future lifetimes from age 65:
As at 1 April 2018 As at 2 April 2017 BCA Automotive BCA Automotive Age Age Age Age Males 22.5 22.5 23.0 23.0 Females 24.4 24.4 25.0 25.0
114 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Changes in the fair value of the defined benefit liability in the BCA Pension Plan are as follows:
As at 1 April 2018 As at 2 April 2017 Plan Plan Plan Plan assets liabilities Total assets liabilities Total £m £m £m £m £m £m At start of year 73.9 (90.0) (16.1) 68.0 (73.8) (5.8) Income statement expense: Current service cost – (1.0) (1.0) – (0.9) (0.9) Interest income/(expense) 1.8 (2.2) (0.4) 2.2 (2.4) (0.2) Total amount charged to the income statement 1.8 (3.2) (1.4) 2.2 (3.3) (1.1) Remeasurements: Actuarial gains/(losses) due to changes in financial assumptions – 2.7 2.7 – (17.3) (17.3) Actuarial gains due to changes in demographic assumptions – 2.7 2.7 – – – Experience gains and losses 2.1 (1.4) 0.7 7.4 0.1 7.5 Total amount recognised in other comprehensive income 2.1 4.0 6.1 7.4 (17.2) (9.8) Cash: Employer contributions 0.5 – 0.5 0.6 – 0.6 Employee contributions 0.3 (0.3) – 0.3 (0.3) – Benefits paid (4.4) 4.4 – (4.6) 4.6 – Net cash (3.6) 4.1 0.5 (3.7) 4.3 0.6 At year end 74.2 (85.1) (10.9) 73.9 (90.0) (16.1)
Changes in the fair value of the defined benefit asset in the Automotive Plan are as follows:
As at 1 April 2018 As at 2 April 2017 Plan Plan Plan Plan assets liabilities Total assets liabilities Total £m £m £m £m £m £m At start of year 13.6 (14.8) (1.2) 11.8 (13.6) (1.8) Income statement expense: Interest income/(expense) 0.3 (0.4) (0.1) 0.4 (0.5) (0.1) Total amount charged to the income statement 0.3 (0.4) (0.1) 0.4 (0.5) (0.1) Remeasurements: Actuarial gains due to changes in financial assumptions – 1.5 1.5 – – – Experience gains and losses 0.1 0.4 0.5 3.2 (3.0) 0.2 Total amount recognised in other comprehensive income 0.1 1.9 2.0 3.2 (3.0) 0.2 Cash: Employer contributions 0.5 – 0.5 0.5 – 0.5 Benefits paid (1.0) 1.0 – (2.3) 2.3 – Net cash (0.5) 1.0 0.5 (1.8) 2.3 0.5 At year end 13.5 (12.3) 1.2 13.6 (14.8) (1.2)
Amount recognised in the balance sheet liability represented by: BCA Pension Plan 74.2 (85.1) (10.9) 73.9 (90.0) (16.1) Automotive Plan 13.5 (12.3) 1.2 13.6 (14.8) (1.2) Total 87.7 (97.4) (9.7) 87.5 (104.8) (17.3)
BCA Marketplace plc Annual Report and Accounts 2018 115 PENSIONS AND OTHER INFORMATION continued
26. Pensions and other post-retirement benefits continued At the end of the reporting period the plan assets by category had been invested as follows:
As at 1 April 2018 As at 2 April 2017 BCA Automotive Total BCA Automotive Total £m £m £m £m £m £m Equities (quoted) 34.6 7.5 42.1 33.7 7.7 41.4 Corporate bonds (quoted) 26.8 2.1 28.9 26.7 2.0 28.7 Government bonds (quoted) 4.0 3.5 7.5 4.2 3.3 7.5 Diversified growth funds (quoted) 8.7 – 8.7 9.3 – 9.3 Other 0.1 0.4 0.5 – 0.6 0.6 Total plan assets 74.2 13.5 87.7 73.9 13.6 87.5
Risk management These defined benefit plans expose the Group to actuarial risks, such as mortality risk, interest rate risk and market investment risk. The investment policies of each scheme are described below:
Asset volatility Plan liabilities, in respect of defined benefit obligations, are calculated on a discounted basis using a discount rate which is set with reference to corporate bond yields. If the plan assets underperform this yield, then this will create a deficit. The trustees of each plan, and their advisers, carry out regular reviews of asset allocations within each plan and consider the need to switch assets in line with the investment strategies. Currently the plans hold approximately 40% of assets as defensive assets (government and corporate bonds) with the intention of mitigating significant changes in yields.
As each plan matures, the level of investment risk is reduced by investing more in government and corporate bonds that better match the liabilities. However, the Group believes that due to the long-term nature of the scheme liabilities, a level of continuing equity investment is an appropriate element of the long-term investment strategy.
In respect of Guaranteed Minimum Pension (‘GMP’) obligations, the strategy has the objectives of achieving an overall rate of return that is sufficient to meet pensioners’ reasonable expectations, reduce investment return volatility over the short-term period to retirement where this is possible and to invest in assets that are liquid such that they enable switching between asset classes. In order to achieve these objectives, the strategy is to invest in a mixture of on-risk assets (including equities) and off-risk assets (including bonds, gilts and cash), with the proportionate allocation of the latter increasing according to an agreed profile as members approach their normal retirement date. Inflation The plans’ pension liabilities in deferment are linked to inflation. Higher inflation will lead to higher liabilities, although in the majority of cases there are caps on the level of inflationary increases to be applied to pension obligations in order to protect the plans from extreme inflation. The BCA Pension Plan holds approximately 5% of the plans’ assets in index-linked bonds to partially hedge against this risk. The remainder of the plans’ assets are either unaffected by or loosely correlated with inflation, and so an increase in inflation can lead to an increase in the plan deficit. Mortality The plans’ obligation is to provide a pension for the life of their members, so realised increases in life expectancy will result in an increase in the plans’ benefit payments. Whilst future mortality rates cannot be predicted with certainty the plans adopt up to date mortality assumptions and review the overall risk as part of the triennial actuarial valuations. Bond yields Plan assets are likely to decrease following an increase in the interest rate. This is due to an increase in interest rates having the effect of a decrease in value of the defensive assets held by the plans. This risk is partially mitigated by the measurement of plan liabilities being linked to bond yields. An increase in interest rates has the effect of increasing bond yields, which in turn decreases plan liabilities. If interest rates decrease the opposite is true for both plan liabilities and assets. Salary changes The calculation of the BCA Pension Plan liabilities uses the future estimated salaries of plan participants. Increases in the salary of plan participants above that assumed will increase the plan liabilities.
The Automotive Plan is closed to future accruals, so is not exposed to this risk.
116 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Sensitivity analysis The disclosures above are dependent on the assumptions used. The table below demonstrates the sensitivity of the defined benefit obligations to changes in the significant assumptions used for the schemes.
Impact on the defined benefit obligations:
BCA Automotive BCA Automotive
£m £m % of liability % of liability Discount rate: +0.25% (3.6) (0.5) (4.2%) (4.3%) Inflation and related assumptions: +0.25% 1.9 0.2 2.2% 1.8% Mortality: reduced by 10% 2.7 n/a 3.2% n/a Mortality: long-term rate of longevity improvement: +0.25% n/a 0.1 n/a 0.9%
The above analysis is based on a change in an assumption while holding all other assumptions constant, and in practice this is unlikely to occur. The above variances have been used as they are believed to be reasonably possible fluctuations.
Expected future cash flows The Group expects the employer contributions to be made to its defined benefit plans in the 2018/19 financial year to be £1.0m. The Group’s management do not expect any material changes to the annual cash contributions over the next three years; however it keeps contributions under review in the light of movements in the funding position of the schemes.
The defined benefit obligations are based on the current value of expected benefit payment cash flows to members over the next several decades. The average duration of the liabilities is approximately 18 years for the BCA Pension Plan and 21 years for the Automotive Plan.
27. Financial instruments – risk management Categories of financial instruments
As at As at 1 April 2018 2 April 2017 £m £m Financial assets Loans and receivables 470.5 377.6 Financial liabilities Amortised cost 856.6 774.7
Loans and receivables include trade receivables, other receivables and cash and cash equivalents. Included in financial liabilities at amortised cost are trade and other payables excluding obligations under operating and finance leases, bank borrowings and Partner Finance borrowings.
Reconciliation of liabilities arising from financing activities
Non cash changes Foreign As at Cash exchange Finance As at 2 April 2017 flows Additions movements charge 1 April 2018 £m £m £m £m £m £m Long-term borrowings 254.9 – – 1.3 0.7 256.9 Short-term borrowings 90.0 (20.0) – – – 70.0 Partner Finance borrowings 69.0 36.5 – – – 105.5 Finance lease liabilities 30.8 (7.1) 6.9 0.2 1.1 31.9 Total liabilities from financing activities 444.7 9.4 6.9 1.5 1.8 464.3
BCA Marketplace plc Annual Report and Accounts 2018 117 PENSIONS AND OTHER INFORMATION continued
27. Financial instruments – risk management continued Financial risk management The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. The responsibility for monitoring the effectiveness of risk management is carried out by the Audit and Risk Committee on behalf of the Board of Directors.
Market risk Market risk is the risk that changes in market prices (principally exchange rates and interest rates) will affect the Group’s income or the value of its holdings of financial instruments.
Foreign exchange risk The Group operates in the UK and continental Europe (Germany, France, Spain, Portugal, Netherlands, Italy, Denmark, Sweden and Switzerland) and is therefore exposed to foreign exchange risk. Foreign exchange risk arises primarily on recognised assets and liabilities and net investments in foreign operations. These overseas operations’ revenues and costs are mainly denominated in the currencies of the countries in which the operations are located. The most significant of these is the Euro. The Euro to Sterling exchange rates used by the Group are shown below:
For the For the year ended year ended 1 April 2018 2 April 2017 Euro – opening (period start) 1.1694 1.2503 Euro – average 1.1363 1.1940 Euro – closing 1.1410 1.1694
The functional currencies of the revenue and adjusted EBITDA of the Group’s operations are as follows:
For the year ended For the year ended 1 April 2018 2 April 2017 GBP Euro Other Total GBP Euro Other Total Revenue (£m) 2,213.5 171.3 46.7 2,431.5 1,855.4 148.7 25.6 2,029.7 Revenue (%) 91.0% 7.1% 1.9% 100.0% 91.4% 7.3% 1.3% 100.0% Adjusted EBITDA (£m) 126.2 22.5 10.8 159.5 106.0 22.9 6.7 135.6 Adjusted EBITDA (%) 79.1% 14.1% 6.8% 100.0% 78.2% 16.9% 4.9% 100.0%
The Group does not have significant transactional foreign currency cash flow exposures. The Group monitors its exposure to currency fluctuations on an ongoing basis. The Group maintains part of its net debt in Euros to reflect the currency in which its EBITDA is generated.
The Group does not normally hedge profit translation exposures. During the year and as at 1 April 2018 the Group did not have any hedges in place.
For the year ended 1 April 2018, if Sterling had strengthened by 10% on average against the Euro with all other variables held constant, adjusted EBITDA for the year would have been £2.0m lower (for the year ended 2 April 2017: £2.1m lower) as a result of a reduction of the equivalent value in Sterling of profits denominated in Euros.
Details of the currencies in which the Group’s cash, trade and other receivables, trade and other payables and loans and overdrafts are denominated are set out below:
As at 1 April 2018 As at 2 April 2017 GBP Euro Other Total GBP Euro Other Total £m £m £m £m £m £m £m £m Cash 66.5 47.3 21.5 135.3 45.5 29.1 9.8 84.4 Trade and other receivables 325.9 52.8 11.0 389.7 281.0 45.9 10.2 337.1 Trade and other payables (402.2) (91.3) (28.7) (522.2) (368.8) (74.7) (16.9) (460.4) Borrowings (including Partner Finance borrowings) (379.8) (52.6) – (432.4) (362.6) (51.3) – (413.9) Net (389.6) (43.8) 3.8 (429.6) (404.9) (51.0) 3.1 (452.8)
118 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Interest rate risk The Group’s interest rate risk arises from the Group’s borrowings as disclosed in note 21. Interest rates have been historically low and stable in terms of both LIBOR and EURIBOR rates and consequently no structured hedging has been implemented in the current year. The Group will continue to monitor interest rates and assess the requirement for hedging in the future. All of the Group’s finance leases are at fixed rates of interest.
For the year ended 1 April 2018, if the average rate on floating rate borrowings had been 50 basis points higher with all other variables held constant, post-tax profit for the year would have been £1.4m lower (for the year ended 2 April 2017: £1.2m lower).
Credit risk Credit risk is the risk of financial loss in the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally through trade receivables from customers and cash balances.
The Group has policies in place to ensure that services are only provided to clients with an appropriate credit history.
Customers who have an account with BCA Partner Finance are able to finance vehicles acquired through UK Vehicle Remarketing. Prior to opening an account and subsequently, at least on an annual basis, a credit assessment is completed and appropriate security is obtained. In addition, legal title of the vehicle remains with the Group until the outstanding balance is settled in full.
Cash and cash equivalents are held with reputable institutions. The cash required for working capital is held with reputable banks in each country of operation as appropriate. All other material cash balances are deposited with financial institutions whose credit rating is at least Standard and Poors A- or equivalent.
Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group Finance. Group Finance monitors forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group minimises the risk of breaching borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plan and covenant compliance requirements on its borrowings.
The Group has a £250.0m (2017: £250.0m) revolving facility. At 1 April 2018 £70.0m (2017: £90.0m) of the facility had been drawn, as well as £4.4m (2017: £5.5m) of the facility having been utilised to provide guarantees to third parties. This revolving facility is considered by management to provide adequate flexibility given the current liquidity of the business.
The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the tables below are the contractual undiscounted cash flows:
Carrying Contractual Within Between Between Over amount total 1 year 1 and 2 years 2 and 5 years 5 years As at 1 April 2018 £m £m £m £m £m £m Bank borrowings 326.9 328.9 70.0 – 258.9 – Partner Finance borrowings 105.5 105.5 105.5 – – – Trade and other payables 522.2 456.1 430.4 7.0 16.6 2.1
Carrying Contractual Within Between Between Over amount total 1 year 1 and 2 years 2 and 5 years 5 years As at 2 April 2017 £m £m £m £m £m £m Bank borrowings 344.9 347.6 90.0 – 257.6 – Partner Finance borrowings 69.0 69.0 69.0 – – – Trade and other payables 460.4 391.6 356.2 15.7 17.3 2.4
Capital risk management The Board’s policy is to maintain a strong capital base (which comprises share capital, reserves and net debt excluding finance leases and Partner Finance borrowings) so as to maintain creditor and market confidence and to sustain future development of the business. There were no changes in the Group’s approach to capital management during the year.
Fair value The fair values of all financial instruments are equal to their carrying value.
BCA Marketplace plc Annual Report and Accounts 2018 119 PENSIONS AND OTHER INFORMATION continued
28. Related party transactions Remuneration of the Directors, who constitute the key management personnel of the Group, has been disclosed in the Remuneration Committee report on pages 58 to 64.
Payments to Marwyn Capital LLP of £0.2m in the year (for the year ended 2 April 2017: £0.7m) relate to corporate finance advisory fees, ongoing administrative and office services and acquisition fees in the prior year. There was no balance owing as at 1 April 2018 and 2 April 2017.
The Group has not made any provision for bad or doubtful debts in respect of related party debtors, nor has any guarantee been given during the year regarding related party transactions.
29. Events after the reporting period After the balance sheet date, deferred consideration in respect of the Paragon acquisition was paid (see note 18).
On 18 April 2018, 2,245,554 Ordinary shares of £0.01 each held as Treasury shares were transferred from the Treasury reserve for the purposes of employees’ share scheme allotments. No further awards remain outstanding under the Group’s long-term incentive scheme. Following the transfer, issued capital consists of 804,256,263 Ordinary shares of £0.01 each of which 6,754,446 Ordinary shares of £0.01 each are held in Treasury.
120 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
30. List of Group undertakings All companies are 100% owned unless otherwise stated.
Name and Address Nature of business Austria Börsegasse 10/5, 1010 Wien BCA Autoauktionen GesmbH Non-trading
Belgium Rue de l’Hospice Communal 35 – 1170 Watermael-Boitsfort BCA Autoveiling – Enchères Autos S.A. Non-trading
Parc de l’Alliance, Boulevard de France 9 A, 1420, Braine l’Alleud BCA Europe Transport Solutions S.A. Logistics Services for the Automotive Sector
Denmark Auktionsvej 8, DK-7120, Vejle BCA Autoauktion A/S Motor Vehicle Remarketing T4G One Europe ApS Vehicle Sale and Purchase
England and Wales Headway House, Crosby Way, Farnham, Surrey GU9 7XG Autolink Limited Non-trading Autos on Show Limited Non-trading Autotrax Limited (76%) Property Leasing BCA Automotive Ltd Intermediate Parent BCA Central Limited Intermediate Parent and Management Service Company BCA Europe Limited Intermediate Parent and Management Service Company BCA Fleet Solutions Limited Motor Vehicle Processing Services BCA Fleet Solutions 2 Limited Motor Vehicle Processing Services BCA Group Europe Limited Intermediate Parent BCA Holdings Limited Intermediate Parent BCA Logistics Limited Logistics Services for the Automotive Sector BCA Limited Non-trading BCA Osprey Finance Limited Non-trading BCA Osprey I Limited Intermediate Parent BCA Osprey II Limited Intermediate Parent BCA Outsource Solutions Limited Vehicle Sale and Purchase BCA Pension Trustees Limited Non-trading BCA Remarketing Group Limited Intermediate Parent BCA Remarketing Solutions Limited Motor Vehicle Remarketing BCA Trading Limited Intermediate Parent BCA Vehicle Finance Limited Motor Vehicle Finance BCA Vehicle Services Limited Motor Vehicle Processing Services British Car Auctions Limited Motor Vehicle Remarketing Carland.com Limited (84%) Motor Vehicle Remarketing Expedier Catering Limited Catering Expert Remarketing Limited Non-trading Life on Show Limited Motor Vehicle Photographic Services Magna Motors Limited Non-trading NKL Automotive Limited1 Non-trading Paragon Automotive 2009 Limited Property Leasing Paragon Automotive Logistics Ltd Logistics Services for the Automotive Sector Paragon Automotive Limited Non-trading Paragon Automotive Services Limited Property Leasing Paragon Fleet Solutions Limited Motor Vehicle Processing Services Paragon Remarketing Services Limited Motor Vehicle Remarketing Paragon Vehicle Services Limited Non-trading Pennine Metals B Limited Intermediate Parent Scottish Motor Auctions (Holdings) Limited Intermediate Parent
BCA Marketplace plc Annual Report and Accounts 2018 121 PENSIONS AND OTHER INFORMATION continued
30. List of Group undertakings continued Name and Address Nature of business England and Wales Headway House, Crosby Way, Farnham, Surrey GU9 7XG Sensible Automotive Limited Logistics Services for the Automotive Sector SMA Vehicle Remarketing Limited Non-trading Smart Prepared Systems Limited Non-trading Supreme Wheels Direct Ltd (75%) Motor Vehicle Processing Services TF1 Limited Intermediate Parent The British Car Auction Group Limited Intermediate Parent Tradeouts Limited (51%) Non-trading VAM UK Acquisition Corporation Limited Intermediate Parent Walon Automotive Services Limited Non-trading Walon Limited Logistics Services for the Automotive Sector We Buy Any Car Limited Vehicle Sale and Purchase
France 5 rue Charles de Gaulle – 94140 Alfortville BC Remarketing S.A. Motor Vehicle Remarketing BCAuto Enchères S.A. Motor Vehicle Remarketing
Germany Alsfelder Str.23, 36272 Niederaula Fleet Control Monitor GmbH (76%) Vehicle Inventory Management
Flosshafenstrasse 5, 41460 Neuss, Germany BCA Auctions GmbH Motor Vehicle Remarketing BCA Autoauktionen GmbH Motor Vehicle Remarketing BCA Automotiv GmbH & Co. KG Motor Vehicle Remarketing BCA Automotiv Verwaltungs GmbH Intermediate Parent BCA Europe GmbH Intermediate Parent CarTrade2B GmbH Vehicle Sale and Purchase
Königsallee 106, 40216 Düsseldorf ZABATUS Grundstücks – Vermietungsgesellschaft mbH & Co. Objekt Property Leasing BCA Neuss KG (94%)
Hungary 1061 Budapest, Andrássy út 36. 2. em. 5., Magyarország BCA Hungária Gépjármü-aukciós Kft. Non-trading
Italy Via Emilia 143/A, Lodi 26900 BCA Italia SRL Motor Vehicle Remarketing
Jersey One Waverley Place, Union Street, St Helier, Jersey JE1 1AX H.I.J. Ltd Intermediate Parent
Luxembourg 5, Rue Guillaume J. Kroll, Luxembourg, Luxembourg Osprey Investment S.à.r.l.2 Non-trading
Netherlands De Landweer 4, 3771 LN Barneveld BCA Administratie B.V. Vehicle Sale and Purchase BCA Auctions Holdings B.V. Intermediate Parent BCA Autoveiling B.V. Motor Vehicle Remarketing FleetSelect B.V. Motor Vehicle Remarketing
122 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
Name and Address Nature of business Poland Klaudyn, 5 Estrady, 05-080 Izabelin BCA Polska Sp. z o.o.3 Non-trading
Portugal Av. Antonio Augusto de Aguiar, 38 – 6º, 1050-016 Lisboa G – Grupo – Investimentos e Participações, S.A. Intermediate Parent S.P.L.A. – Sociedade Portuguesa de Leilões de Automóveis, S.A. Motor Vehicle Remarketing
Romania Bucharest, 1st district, Buzesti St. no. 50-52, module 12, 11th floor BC Autolicitatii România – S.R.L Non-trading
Scotland BCA Kinross, Bridgend, Kinross KY13 8EN Burrpark Limited Supply of Labour and Equipment Motor Auctions (Properties) Limited Property Leasing Scottish Motor Auctions Limited Non-trading
Spain Sagasta, 15 Planta 2 puerta Izquierda 28004 Madrid BCA España Autosubastas de Vehículos SL Motor Vehicle Remarketing BCA Management de Vehiculos SL Vehicle Sale and Purchase BCA Servicios Inmobiliarios SL Property Leasing
Sweden Box 5208, 151 13 Södertälje BCA Vehicle Remarketing AB Motor Vehicle Remarketing CarTrade2B AB Vehicle Sale and Purchase
Switzerland Industriepark/LC2, CH – 6246 Altishofen BCA AutoRemarketing Schweiz Motor Vehicle Remarketing
1 Dissolved on 24 April 2018 2 Dissolved on 4 May 2018 3 Dissolved on 26 April 2018
Financial statements for all of the companies listed can be requested from the Company Secretary at Haversham House, Coronation Business Park, Kiln Road, Kempston Hardwick, Bedford MK43 9PR.
BCA Marketplace plc Annual Report and Accounts 2018 123 124 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
COMPANY FINANCIAL STATEMENTS
Company accounts 126 Company balance sheet Company statement of changes in equity Company cash flow statement Notes to the Company financial statements
BCA Marketplace plc Annual Report and Accounts 2018 125 COMPANY BALANCE SHEET
As at As at 1 April 2018 2 April 2017 Note £m £m Non-current assets Property, plant and equipment 0.2 0.2 Investments 3 1,067.6 1,067.6 Total non-current assets 1,067.8 1,067.8
Current assets Trade and other receivables 0.1 0.3 Cash and cash equivalents 0.7 0.4 Total current assets 0.8 0.7 Total assets 1,068.6 1,068.5
Current liabilities Trade and other payables 4 (106.9) (33.7) Total liabilities (106.9) (33.7) Net assets 961.7 1,034.8
Equity shareholders’ funds Share capital 5 8.0 7.8 Treasury reserve 5 (15.4) – Merger reserve 5 103.6 103.6 Retained profit 865.5 923.4 Total shareholders’ funds 961.7 1,034.8
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Parent Company profit and loss account and the related notes. The loss for the Parent Company for the year ended 1 April 2018 was £3.9m (year ended 2 April 2017: loss of £4.3m).
The financial statements on pages 126 to 131 were approved by the Board on 27 June 2018 and were signed on its behalf by:
Avril Palmer-Baunack Tim Lampert Executive Chairman Chief Financial Officer
126 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
COMPANY STATEMENT OF CHANGES IN EQUITY
Share Treasury Merger Retained capital reserve reserve profit Total Note £m £m £m £m £m Balance at 3 April 2016 7.8 – 103.6 974.5 1,085.9 Total comprehensive income for the year Loss for the year – – – (4.3) (4.3) Total comprehensive loss for the year – – – (4.3) (4.3) Contributions and distributions Dividends paid 6 – – – (48.4) (48.4) Share based payments 9 – – – 1.6 1.6 Total transactions with owners – – – (46.8) (46.8) Balance at 2 April 2017 7.8 – 103.6 923.4 1,034.8 Total comprehensive income for the year Loss for the year – – – (3.9) (3.9) Total comprehensive loss for the year – – – (3.9) (3.9) Contributions and distributions Share based payments 9 – – – 2.0 2.0 Shares issued 5 0.2 – – (0.2) – Dividends paid 6 – – – (55.8) (55.8) Purchase of own shares 5 – (15.4) – – (15.4) Total transactions with owners 0.2 (15.4) – (54.0) (69.2) Balance at 1 April 2018 8.0 (15.4) 103.6 865.5 961.7
BCA Marketplace plc Annual Report and Accounts 2018 127 COMPANY CASH FLOW STATEMENT
For the For the year ended year ended 1 April 2018 2 April 2017 £m £m Cash flows from operating activities Loss for the year (3.9) (4.3) Adjustments for: Income tax credit (0.1) – Finance costs 1.6 – Depreciation 0.1 0.1 Equity-settled share based payments 2.0 1.6 Acquisition related costs – 1.9 Changes in working capital: Trade and other receivables 0.2 0.1 Trade and other payables 1.3 (0.2) Net cash inflow/(outflow) from operating activities before acquisition related costs 1.2 (0.8) Acquisition related costs – (1.9) Net cash inflow/(outflow) from operating activities 1.2 (2.7)
Cash flows from investing activities Purchase of property, plant and equipment (0.2) (0.4) Proceeds from sale of property, plant and equipment 0.1 0.1 Net cash outflow from investing activities (0.1) (0.3)
Cash flows from financing activities Purchase of own shares (15.4) – Amounts loaned from subsidiary undertakings 70.4 48.1 Dividends paid (55.8) (48.4) Net cash outflow from financing activities (0.8) (0.3)
Net increase/(decrease) in cash and cash equivalents 0.3 (3.3) Cash and cash equivalents brought forward 0.4 3.7 Cash and cash equivalents at year end 0.7 0.4
128 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1. Accounting policies Basis of preparation These Company financial statements for the year ended 1 April 2018 have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) and IFRS Interpretations Committee (‘IFRS IC’) interpretations as adopted by the European Union (‘Adopted IFRS’) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The accounting policies have, unless otherwise stated, been applied consistently to all periods presented in these financial statements. The financial statements have been prepared under the historical cost convention.
The financial statements and the notes to the financial statements are presented in millions of pounds Sterling (‘£m’) except where otherwise indicated.
The accounting policies applied in the preparation of these Company financial statements are the same as those set out in note 3 of the Group financial statements, with the exception of note 2 ‘Basis of consolidation’ and the policy on investments in subsidiaries, which are stated at cost less impairment.
2. Employees and Directors Staff costs for the Company during the year:
For the For the year ended year ended 1 April 2018 2 April 2017 Note £m £m Wages and salaries 3.5 3.1 Pension costs 0.1 0.1 Social security costs 1.2 0.7 Share based payment expense 9 2.0 1.6 Total employment cost expense 6.8 5.5
The average monthly number of people employed (including Executive Directors) during the year to 1 April 2018 was 13 (year ended 2 April 2017: 12 people). The Company offers membership of a defined contribution scheme, the pension cost in the year to 1 April 2018 was £0.1m (year ended 2 April 2017: £0.1m).
For details of Directors’ emoluments see the Annual report on remuneration on pages 58 to 64.
3. Investments in subsidiaries
Total £m Cost At 2 April 2017 and 1 April 2018 1,067.6
At 1 April 2018 the Company owns 100% of the issued share capital of H.I.J. Ltd, a company incorporated in Jersey, and owns indirectly the subsidiary undertakings listed in note 30 of the consolidated accounts.
BCA Marketplace plc Annual Report and Accounts 2018 129 NOTES TO THE COMPANY FINANCIAL STATEMENTS continued
4. Trade and other payables
As at As at 1 April 2018 2 April 2017 £m £m Social security and other taxes 0.1 0.1 Accruals and other payables 3.3 2.1 Amounts owed to subsidiary undertakings 103.5 31.5 Total trade and other payables 106.9 33.7
Amounts owed to subsidiary undertakings are unsecured, repayable on demand and bear interest at the three month British Pound Sterling LIBOR plus 2.25% in the current and prior year.
5. Share capital and reserves The details of the Company’s share capital and the nature of the reserves are disclosed in note 23 of the consolidated financial statements.
6. Dividends The details of the Company’s dividends are disclosed in note 24 of the consolidated financial statements.
7. Financial instruments – risk management Financial risk management The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange and interest rate risk), credit risk and liquidity risk. The responsibility for monitoring the effectiveness of risk management is carried out by the Audit and Risk Committee on behalf of the Board of Directors.
Market risk Market risk is the risk that changes in market prices (principally exchange rates and interest rates) will affect the Company’s income or the value of its holdings of financial instruments.
Foreign exchange risk The Company has no direct significant interaction with foreign currency. Members of the Group in which the Company holds its investment operate in continental Europe, which means that through its investment the Company has some indirect exposure to foreign exchange risk.
Interest rate risk The Company has no external debt and therefore has no significant exposure to interest rate risk. The intercompany loans within trade and other payables are at a floating interest rate.
Credit risk Credit risk is the risk of financial loss in the Company if a counterparty to a financial instrument fails to meet its contractual obligations and arises principally through receivables from Group companies and cash balances.
Cash and cash equivalents are held with reputable institutions. All material cash amounts are deposited with one of the Group’s principal bank service providers in the UK.
Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.
The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
The Company currently meets all liabilities from cash reserves and intercompany loans. The Company’s liability for operating expenses is monitored on an ongoing basis to ensure cash resources are adequate to meet liabilities as they fall due.
The Company’s trade and other payables in the current and prior year are all due to be settled within one year and the contractual total due equals the carrying amount.
Capital risk management The aim of the Company is to maintain sufficient funds to enable it to make suitable investments and incremental acquisitions whilst minimising recourse to bankers and/or shareholders.
Fair values The fair values of all financial instruments in both years are equal to their carrying values.
130 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
8. Related party transactions Remuneration of the Directors who constitute key management personnel of the Company, has been disclosed in the Remuneration Committee report on pages 58 to 64. Other related party transactions with the Company are as follows:
Transaction amount Balance owing
For the For the year ended year ended As at As at 1 April 2018 2 April 2017 1 April 2018 2 April 2017 Related party relationship £m £m £m £m Subsidiaries: Amounts owing by the Company – – (103.5) (31.5) Management fees 5.8 4.9 – – Interest income (1.6) (0.1) – – Other: Marwyn Capital LLP (0.2) (0.7) – –
Payments to Marwyn Capital LLP relate to corporate finance advisory fees, ongoing administrative and office services, and acquisition fees in the prior year.
The Company has not made any provision for bad or doubtful debts in respect of related party debtors nor has any guarantee been given during the year regarding related party transactions.
9. Share based payments The details of the Company’s share based payments are set out in note 25 in the consolidated financial statements.
10. Commitments and contingencies Capital commitments There are no capital commitments at either year end to disclose in this report.
Contingencies There are no disputes with any third parties that would result in a material liability for the Company.
The Company has entered into an agreement over various bank loans and overdrafts of certain Group undertakings and has granted as security a fixed and floating charge over all its present and future assets. At the year end the loans totalled £328.9m (2017: £347.6m).
BCA Marketplace plc Annual Report and Accounts 2018 131 SHAREHOLDER INFORMATION
Advisers and Registrar
Sponsor, Financial Adviser and Joint Broker Cenkos Securities plc
Joint Brokers Numis Securities Limited Goldman Sachs International
Auditor PricewaterhouseCoopers LLP
Solicitors Bryan Cave Leighton Paisner LLP
PR advisers Square 1 Consulting Buchanan Communications
Registrar Link Asset Services
Group Legal Director and Company Secretary Martin Letza
ISIN: GB00BP0S1D85 Ticker: BCA
Registered Office BCA Marketplace plc Haversham House Coronation Business Park Kiln Road Kempston Hardwick Bedford MK43 9PR Company Number: 09019615
Website: www.bcamarketplaceplc.com
132 BCA Marketplace plc Annual Report and Accounts 2018 Strategic report Governance Financials
BCA Marketplace plc Annual Report and Accounts 2018 133 THREE YEAR HISTORY
For the year ended For the year ended For the 15 months 1 April 2018 2 April 2017 ended 3 April 2016¹ £m £m £m £m £m £m Revenue 2,431.5 2,029.7 1,153.1 Cost of sales (1,983.4) (1,624.5) (844.5) Gross profit 448.1 405.2 308.6 Operating costs (360.5) (330.9) (292.3) Operating profit 87.6 74.3 16.3 Finance income 0.3 0.4 0.3 Finance costs (12.0) (18.3) (12.7) Profit before income tax 75.9 56.4 3.9 Income tax (charge)/credit (18.9) (15.3) 3.8 Profit for the year/period 57.0 41.1 7.7
Attributable to: Equity owners of the Parent 56.5 40.9 7.7 Non-controlling interests 0.5 0.2 – 57.0 41.1 7.7
Earnings per share from continuing operations attributable to the equity holders of the Parent during the year/period Basic earnings per share (pence) 7.2 5.2 1.2 Diluted earnings per share (pence) 7.0 5.1 1.2
Operating profit: 87.6 74.3 16.3
Add : Depreciation and amortisation 26.9 25.2 17.0 Amortisation of acquired intangibles 40.2 38.5 34.4 Restructuring costs 5.5 – – Profit on sale and leaseback (1.7) (5.3) – Premium Listing costs 1.0 – – Acquisition related items – 2.9 27.4 Business closure costs – – 1.1 Other significant or non-recurring items – – 2.3
Adjusted EBITDA 159.5 135.6 98.5
Less : Depreciation and amortisation (26.9) (25.2) (17.0) Net finance costs (11.7) (17.9) (12.4) Add : Arrangement fees write-off – 4.9 –
Adjusted profit before income tax 120.9 97.4 69.1
Adjusted earnings per share from continuing operations attributable to the equity holders of the Parent during the year/period Adjusted basic earnings per share (pence) 11.8 9.2 7.1 Adjusted diluted earnings per share (pence) 11.4 9.1 7.0 Equity dividend per share 8.55p2 6.75p 6.00p
1 The 15 months ended 3 April 2016 contains 12 months of trading of the BCA Group from its acquisition on 2 April 2015, and incorporates other acquired companies from their respective dates of acquisition by the Group 2 Subject to shareholder approval at the AGM
This page does not form part of the financial statements
134 BCA Marketplace plc Annual Report and Accounts 2018
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BCA Marketplace plc Haversham House Coronation Business Park Kiln Road Kempston Hardwick Bedford MK43 9PR Registered in England & Wales No. 09019615 © BCA Marketplace plc
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