Inchcape Plc · LSE:INCH
Inchcape — H1 2009 Earnings Presentation
43 slides from Inchcape's earnings presentation, Jul 29, 2009
Slide 1: 2009 Half Year Results
2009 Half Year Results 29 July 2009 “Inchcape’s self-help measures deliver strong cash flow despite unprecedented market conditions.” André Lacroix Group Chief Executive
Slide 2: Ken Hanna, Non-Executive Chairman
Ken Hanna Non-Executive Chairman
Slide 3: André Lacroix, Group Chief Executive
André Lacroix Group Chief Executive
Slide 4: Strong performance in challenging markets
Strong performance in challenging markets • Improvement in our competitive position • Robust profitability in our Distribution businesses • Scale 3S facilities benefiting Retail businesses • Resilience of Aftersales • Cost structure flexibility • Rapid working capital reduction • Significant debt re
Slide 5: Resilient financial performance
Resilient financial performance Vehicle trend Revenue trend H1 -27.4% H1 -15.5% 120,000 1,800 1,600 100,000 1,400 80,000 1,200 Units 1,000 £m 60,000 800 40,000 600 400 20,000 200 0 0 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 H1 P&L and Cash flow Operating profit*: £87.4
Slide 6: Inchcape Top Five Priorities
Inchcape Top Five Priorities Growing market Growing share Aftersales New vehicle demand Resilient Aftersales weak but share growth 50% of gross profit in most markets Managing Reducing capital Reducing costs working capital expenditure Successful restructuring Significant destocking Capex focused on
Slide 7: Financial update
Financial update Gavin Robertson Group Financial Controller
Slide 8: Summary P&L
Summary P&L At actual rate H1 2009 H1 2008 Change £m £m % Sales 2,785.7 3,297.9 (15.5) - Distribution 1,248.4 1,390.3 (10.2) - Retail 1,537.3 1,907.6 (19.4) Operating Profit * 87.4 151.1 (42.2) - Distribution* 64.2 113.7 (43.5) - Retail* 26.6 45.3 (41.3) - Central* (3.4) (7.9) 57.0 Return on sales*
Slide 9: Distribution: Trading profit, ROS and operating cash flow
Distribution: Trading profit, ROS and operating cash flow Trading profit* Return on sales* Operating cash flows At actual rate H1 2009 H1 2008 H1 2009 H1 2008 H1 2009 H1 2008 £m £m % % £m £m Distribution - Australasia 12.8 17.6 5.9% 7.1% 24.5 8.3 - Europe 14.5 25.5 3.5% 5.4% 66.6 15.3 - North Asia 6
Slide 10: Retail: Trading profit, ROS and operating cash flow
Retail: Trading profit, ROS and operating cash flow Trading profit* Return on sales* Operating cash flows At actual rate H1 2009 H1 2008 H1 2009 H1 2008 H1 2009 H1 2008 £m £m % % £m £m Retail - Australasia 3.8 4.5 2.7% 3.1% 15.4 13.0 - Europe (1.1) 2.0 (1.0)% 0.9% 10.2 (3.6) - UK 17.9 31.1 1.8% 2.4%
Slide 11: Cash flow
Cash flow Operating cash flow H1 09 H1 08 Free cash flow H1 09 H1 08 Net cash H1 09 H1 08 £m £m £m £m £m £m Operating profit** 87.4 151.1 Operating cash flow 288.9 109.1 Free cash flow 188.4 1.7 Depreciation / amortisation 17.1 19.2 Net interest (26.5) (24.2) Share issue 234.3 - Working capital 207.
Slide 12: Exceptional items
Exceptional items Q2 2009 Property costs (3.0) Other asset impairment (10.3) Restructuring costs (5.1) TOTAL COST (18.4) 12
Slide 13: Chris Parker
Chris Parker Director of Corporate Affairs
Slide 14: Impact of currency on H1 operating profit
Impact of currency on H1 operating profit* H1 2008 @ actual 2009 @ 2008 actual 2009 @ actual Impact exchange rates rates exchange rates Australasia 22.1 16.3 16.6 0.3 Europe 27.5 11.4 13.4 2.0 North Asia 20.3 5.0 6.7 1.7 South Asia 29.9 25.1 31.1 6.0 Russia and EM 26.5 4.9 3.4 (1.5) Total overseas 1
Slide 15: 2009 Currency call options
2009 Currency call options £m H1 2009 operating profit* £m Hedging impact Crystallised gains on options 3.0 Actual 87.4 At actual rate without benefit of 84.1 Cost of option released to P&L (2.5) call options Mark to market gain 2.8 ∆ 3.3 Total gain booked to date 3.3 • Sterling call options taken t
Slide 16: c.£980m of committed facilities at competitive rates
c.£980m of committed facilities at competitive rates Maturity Interest Bank funding £35m Apr 2010 LIBOR Floating £225m Jul 2011 LIBOR Floating £500m Apr 2013 LIBOR Floating Private Placement $275m May 2017 LIBOR Floating (Fixed for 6 months) $161m May 2019 LIBOR Floating (Fixed for 6 months) c.£980m
Slide 17: Net financing costs
Net financing costs £m H1 2009 H1 2008 Bank and loan interest 3.4 2.9 Stock holding interest 5.0 9.8 Interest on private placement notes 6.3 10.8 Pension interest net (2.6) (3.2) Other including capitalised interest adj. 6.4 0.9 Interest excluding mark to market 18.5 21.2 FV on private placement (73
Slide 18: Strategic update and outlook
Strategic update and outlook
Slide 19: Highlights moving forward
Highlights moving forward • Markets remain difficult and global market recovery not expected to start until well into 2010 • Unique business model providing significant defensive qualities • Pleasing H1 results: • Strong Q1 in Singapore • Better used car margins in UK / Australia • Market share grow
Slide 20: Operational focus on our Top Five Priorities
Operational focus on our Top Five Priorities Growing market Growing share aftersales Managing working Reducing capital Reducing costs capital expenditure Improving competitive position and maximising cash flow
Slide 21: Growing market share: H2 initiatives
Growing market share: H2 initiatives Distribution and VIR Retail • Marketing calendar focused on driving traffic • Key retail metrics captured daily… • Disciplined and targeted planning with lower • …provides performance management data: traffic, advertising costs lead capture, test drives, conversi
Slide 22: Growing Aftersales: H2 initiatives
Growing Aftersales: H2 initiatives Distribution and VIR Retail • Targeted direct marketing to improve retention • Key metrics captured daily… • Parts & Accessories promotions (e.g. leather • …provides performance management data: service upholstery, seasonal offers, MOT campaigns) enquiries, booking
Slide 23: Reducing costs: Like for like operating expense reduction of £48.3m in H1
Reducing costs: Like for like operating expense reduction of £48.3m in H1 £m 13% Bridge calculated in constant currency Q2 restructuring Restructuring cost £5.1m Total headcount reduction (people) 350 Sites closed (number) 7 Annualised benefits £5.5m 23
Slide 24: Managing working capital
Managing working capital 1200 1000 800 • Stock cover target of 1.5x months £m 600 achieved in Q2 09 400 200 0 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Inventory Working capital* * Management definition of Working Capital: inventory, receivables, payables and supplier related credit 24
Slide 25: Reducing capital expenditure: Capex limited to strategic site development
Reducing capital expenditure: Capex limited to strategic site development Strengthened position with opening of 7 new scale retail sites in H1 • Lexus Shanghai - China • Toyota Anderlecht - Belgium • Lexus Toyota Sofia - Bulgaria • Honda Santiago - Chile • Volvo Rublyovka - Moscow • Toyota Rustavell
Slide 26: Five Priorities in Action – Distribution in Greece
Five Priorities in Action – Distribution in Greece Growing market share Growing aftersales Leading position in the market with a • Full implementation of service total share of 10.9% YTD ’09 (+0.7pp reminder program vs. 08). • Accessories per new car sales ratio Significant performance improvement o
Slide 27: Five Priorities in Action – Retail in Australia
Five Priorities in Action – Retail in Australia Growing market share Growing aftersales Focus on Inchcape Advantage funnel Strong growth driven by express management: traffic drivers, converting service initiative web enquirers and test drives. Using online systems to increase Increased market share
Slide 28: Key Market update and outlook
Key Market update and outlook
Slide 29: UK - Outperforming the industry
UK - Outperforming the industry 2009 TIV 1.75m to 1.85m, -17.8% to 13.2% vs. LY Estimate H1 • New Car Market down 26% : Retail down 20% ; Fleet / Business down 30% • In June, registrations to private buyers rose for the first time since November 2007, up 3.9%. Positive impact of scrappage scheme now
Slide 30: Europe - Leveraging new models from Toyota and Mazda
Europe - Leveraging new models from Toyota and Mazda Belgium Greece Finland 2009 TIV 430k, -20% vs. LY 187k, -30% vs. LY 140k, -38% vs. LY Estimate H1 • Market down 16%. Margin pressure • Market down 29%. Vehicle tax • Market down 41%. due to aggressive competitor pricing reduction introduced in Apr
Slide 31: South Asia - Strengthening our market leadership
South Asia - Strengthening our market leadership Singapore 2009 TIV 80k, -25% vs. LY Estimate H1 • Market declined 21%, accelerated by high COE prices in Q2 • Gained 6 ppt market share due to strong marketing and weakening parallel importers • Excellent performance in aftersales • COE price increase
Slide 32: North Asia - Strengthening our market leadership
North Asia - Strengthening our market leadership Hong Kong 2009 TIV 26k, -30% vs. LY Estimate H1 • Market down 43% • Significant competitor stocking clearance and pricing pressure • Inchcape remains market leader, increasing market share in Q2 • Strong growth in aftersales H2 Key • Leverage launch o
Slide 33: Australasia - Leveraging new Subaru models
Australasia - Leveraging new Subaru models Australia Distribution Australia Retail 2009 TIV 860k, -13% vs. LY Estimate H1 • Australian market down 16.1% • Strong retail delivery, especially in New and • Record Subaru market share of 4.2% benefiting Used cars and F&I from new model line up and effect
Slide 34: Russia - Strengthening our competitive position in Moscow and St Petersburg
Russia - Strengthening our competitive position in Moscow and St Petersburg 2009 TIV 1.45m, -51% vs. LY Estimate H1 • Market fully impacted by the downturn (-49% YTD) but large scale facilities delivered solid profitability • Market share improvement in St Petersburg and Moscow • Gross margin mix fa
Slide 35: Emerging Markets - Maximising cash flow in Eastern Europe and building fundamentals in China
Emerging Markets - Maximising cash flow in Eastern Europe and building fundamentals in China The Baltics The Balkans Poland China Ethiopia / South America 2009 TIV 38k -67% vs. LY 174k -49.6% vs. LY 379k +0.1% vs. LY 10.952m +4.1% vs. LY 149k Estimate S. America -40% vs. LY, Ethiopia N/A) H1 • Marke
Slide 36: Outlook
Outlook “We are pleased with our first half results due to solid performances in Australia, Singapore and the UK, improved Used car margins and good Aftersales resilience. However, in light of the global downturn, we remain cautious for the second half. We will continue to focus on our five prioriti
Slide 37: Appendix
Appendix Appendices
Slide 38: Proven and resilient business model
Proven and resilient business model Broad geographic spread International operations with scale, a leader in 14 markets* Balanced presence across selected mature and emerging markets Multiple brand relationships Management team Strongest brands Experienced and proactive Long-term and scale relations
Slide 39: Broad geographic spread – truly international
Broad geographic spread – truly international United Kingdom (MLP) R Australasia South Asia North Asia 37% of ’08 Group Revenue 11% of ’08 Group Revenue 9% of ’08 Group Revenue 6% of ’08 Group Revenue Russia and 9% of ’08 Group Trading profit 17% of ’08 Group Trading profit 25% of ’08 Group Trading
Slide 40: Long-standing relationships with some of the strongest and best performing OEMs
Long-standing relationships with some of the strongest and best performing OEMs Over the last 5 years, the average light vehicle sales CAGR of Inchcape’s core brand partners was 3.4% compared to the average of the world’s top 100 OEMs of 1.6% Hong Kong Australia Hong Kong UK UK UK Hong Kong 42 years
Slide 41: Definitions
Definitions Like-for-like The following are excluded from like-for-like sales: 1. Businesses that are acquired, from the date of acquisition until the 13th month of ownership 2. Businesses that are sold or closed 3. Retail centres that are relocated from the date of opening until the 13th month of t
Slide 42: Disclaimer
Disclaimer The information and opinions contained in this presentation are provided as at the date of the document. Certain statements in this presentation, particularly those regarding the future prospects of Inchcape plc (“Inchcape”), returns, pricing, acquisitions, divestments, industry growth or
Slide 43: Inchcape
® Inchcape