Slide 1: Capital Markets Day: Powerful Multi-Layered Growth
CAPITAL MARKETS DAY: POWERFUL MULTI-LAYERED GROWTH 6 JUNE 2018
Slide 2: Today's Inchcape Team
2 TODAY’S INCHCAPE TEAM CENTRAL AND REGIONAL TEAM MEMBERS Stefan Bomhard Richard Howes Sunita Entwisle Bertrand Mallet Ruslan Kinebas CEO CFO Head of IR Chief Development Emerging Markets Officer CEO Dean Sykes Helen Cunningham Shaun Carroll Steve Archer Emerging Markets Emerging Markets Global Supp
Slide 3: Powerful Multi-Layered Investment Proposition
3 POWERFUL MULTI-LAYERED INVESTMENT PROPOSITION GROWTH AND CASH RETURNS Distribution at our core: A highly cash generative and sustainable business model Strong and increasing weighting to high growth markets Ignite strategy driving organic performance ahead of market growth Continued consolidation
Slide 4: Today's Agenda
* Inchcape TODAY'S AGENDA
Slide 5: Capital Markets Day Agenda
5 CAPITAL MARKETS DAY AGENDA END OF SESSION OVERVIEW AND VISION ACTIVITY POWERFUL MULTI-LAYERED GROWTH DISTRIBUTION: INTEGRATED ROUTE TO MARKET The Distribution business model explained IGNITE: DRIVING THE BUSINESS FORWARD Operational excellence Consolidation Future trends and opportunities DRIVING
Slide 6: Overview and Vision
POWERFUL MULTI-LAYERED GROWTH OVERVIEW AND VISION DELIVERING A POWERFUL INVESTMENT PROPOSITION
Slide 7: The Inchcape World Today
7 THE INCHCAPE WORLD TODAY UNIQUE GLOBAL DISTRIBUTOR AND RETAILER GLOBAL DISTRIBUTOR AND RETAILER 2017 PROFIT BY CHANNEL * 31 Markets Distribution core RETAIL 19% 81% DISTRIBUTION LONG-TERM PARTNERSHIPS 2017 PROFIT BY REGION * Strong brand portfolio Regionally diverse AUS 20% Number of years of part
Slide 8: Strong Track Record of Delivery
8 STRONG TRACK RECORD OF DELIVERY GROWTH AND CASH GENERATION WITH STRONG RETURNS CUMULATIVE CASH RETURNS FY17 v Share buyback (cumulative) REVENUE £8,949m Dividends (cumulative) 1,019M PBT £383m PBT CAGR (‘14-’17) +8% FCF £314m DPS PAYOUT 40% £47M NET CASH £80m ROCE 30% 2018 * 2011 2012 2013 2014 20
Slide 9: Actively Driving Distribution and Regional Mix
9 ACTIVELY DRIVING DISTRIBUTION AND REGIONAL MIX SUPPORTIVE TO GROWTH AND FCF PROFIT: REGIONAL MIX PROFIT: CHANNEL MIX POSITIONS INCHCAPE WELL FOR: Australasia 20% 27% Distribution Growth Emerging 11% 25% 71% Markets 81% 29% UK/Europe 20% Retail Asia 33% 35% 29% 19% 2014 2017 PF 2014 2017 PF FCF EM
Slide 10: Inchcape's Future
10 INCHCAPE’S FUTURE DELIVERING SUSTAINABLE GROWTH HOW THE FUTURE LOOKS INCHCAPE’S INITIATIVE Established portfolio of attractive regions Slower new car growth in developed markets Growing exposure to higher growth markets BUSINESS OPTIMISATION Focus beyond new cars Growing size of business
Slide 11: The Inchcape World Tomorrow
11 THE INCHCAPE WORLD TOMORROW POWERFUL MULTI-LAYERED EARNINGS GROWTH DISTRIBUTION AND FAST GROWTH FOCUSED STRENGTHENED BUSINESS - Focus on business optimisation Profit increasingly weighted to Distribution - Consolidation of fragmented industry - Differentiated customer proposition: Innovation Prof
Slide 12: Distribution: Integrated Route to Market
POWERFUL MULTI-LAYERED GROWTH DISTRIBUTION INTEGRATED ROUTE TO MARKET
Slide 13: The Distribution Market Globally
13 THE DISTRIBUTION MARKET GLOBALLY OEM PREFERRED ROUTE TO MARKET IN SMALL TO MEDIUM SIZED MARKETS THIRD PARTY DISTRIBUTION MARKETS: Markets where OEMs don’t Regional TIV * Small and Medium market TIV Approximate split (All markets) (%) of total region have a factory Latin America 4M 1M (30% region)
Slide 14: Distribution: The Brand Custodian
14 DISTRIBUTION: THE BRAND CUSTODIAN BROAD OPERATIONS ACROSS THE VALUE CHAIN OVERVIEW DISTRIBUTION: INTEGRATED IGNITE: DRIVING THE INCHCAPE CONCLUSION AND VISION ROUTE TO MARKET THE BUSINESS FORWARD OPPORTUNITY
Slide 15: Network Management – Greece Case Study
15 NETWORK MANAGEMENT – GREECE CASE STUDY EFFECTIVE MANAGEMENT DURING A CHALLENGING PERIOD STRONG BUSINESS DEALER NETWORK MANAGEMENT MARKET SHARE STRENGTH ENHANCED Inchcape operating since 1986 2008 FINANCIAL CRISIS 30000 14% 11.9% 12.1% Presented network with 3 year plans 25000 10.5% 12% No.1
Slide 16: Brand Positioning – Inchcape Subaru Case Study
16 BRAND POSITIONING – INCHCAPE SUBARU CASE STUDY SUCCESSFUL BRAND POSITIONING: OUTBACK IN AUSTRALIA 2014 OUTBACK PERFORMANCE: INCHCAPE’S ACTION PLAN: THE RESULT: 2015 AND BEYOND Changing market landscape, with growth Product architecture: >300% increase in Outback sales in SUV products across b
Slide 17: Inchcape's Portfolio of Distribution
17 INCHCAPE’S PORTFOLIO OF DISTRIBUTION STRONG BUSINESSES GLOBALLY OVERVIEW DISTRIBUTION: INTEGRATED IGNITE: DRIVING THE INCHCAPE CONCLUSION AND VISION ROUTE TO MARKET THE BUSINESS FORWARD OPPORTUNITY
Slide 18: Barriers to Entry in Distribution
18 BARRIERS TO ENTRY IN DISTRIBUTION STRENGTH IN BUSINESS MODEL AND INCHCAPE'S POSITON HIGH BARRIERS TO ENTRY Exclusive distribution contracts: one contract per brand Well invested business per market Strong track record of delivery Long-standing relationships with brand partners – Financi
Slide 19: Toyota's View on Distribution
TOYOTA’S VIEW ON DISTRIBUTION YOSHI INABA EXECUTIVE ADVISOR TO TOYOTA MOTOR CORPORATION, INCHCAPE SPECIAL ADVISOR
Slide 20: Toyota's View on Distribution
20 TOYOTA’S VIEW ON DISTRIBUTION AN OPTIMAL ROUTE TO MARKET FOR OEMS THE DISTRIBUTION MODEL HAS BEEN KEY TO TOYOTA’S SUCCESS Long history with Distribution partners; it has contributed to Toyota’s success in Japan and internationally Toyota’s core competency is innovation and manufacturing Driving t
Slide 21: Toyota's Partnership with Inchcape
21 TOYOTA’S PARTNERSHIP WITH INCHCAPE 51 YEAR PARTNERSHIP FOR A REASON LONG-STANDING RELATIONSHIP WITH INCHCAPE ENABLED THROUGH STRONG PERFORMANCE Partners since 1967 Inchcape represents Toyota (and associated brands) in 19 markets Inchcape is a top 4 independent distributor for Toyota Market leader
Slide 22: Toyota's View on the Distribution Landscape
22 TOYOTA’S VIEW ON THE DISTRIBUTION LANDSCAPE EVOLVING TRENDS HIGHLIGHT NEED FOR STRONG PARTNERS CONSOLIDATION IN THE MARKET INCREASINGLY A FACTOR Ability to understand and invest in the future is key given changing landscape, as well as to execute Toyota needs to trust a Distribution partner will
Slide 23: Inchcape's Financial Model
INCHCAPE’S FINANCIAL MODEL DRIVEN BY DISTRIBUTION FOCUS
Slide 24: Distribution: Activities Across the Value Chain
24 DISTRIBUTION: ACTIVITIES ACROSS THE VALUE CHAIN HIGHER MARGIN PARTNERSHIP OPERATION DISTRIBUTION RETAIL-ONLY c.80% inchcape EBIT c.20% inchcape EBIT Brand positioning Brand positioning VALUE CHAIN EXPOSURE National marketing National marketing Logistics Logistics (In Market) Parts Distribution Pa
Slide 25: Gross Margin Driven Model
25 GROSS MARGIN DRIVEN MODEL LOWER FIXED COSTS IN DISTRIBUTION FY17, £M DISTRIBUTION RETAIL DISTRIBUTION MODEL Adjusted to a fully-rented basis Higher margin business driven by gross margin Greater variability of overheads Gross Margin % 18% 11% Greater allocation of costs to A&P SG&A % Sales 10%
Slide 26: Efficient Cash Management
26 EFFICIENT CASH MANAGEMENT LOW NET WORKING CAPITAL INVENTORY £M FY17 Day Sales CASH TAX BELOW EFFECTIVE RATE c.90% vehicles, 10% parts Vehicles target 1.5 month forward cover * Inventory 1,769 72 FY17 £86M Parts – just in time approach Financing -1,456 -59 23% of PBT (last 4 yr avg) Net
Slide 27: Strong Cash Generation
27 STRONG CASH GENERATION DRIVEN BY DISTRIBUTION BUSINESS SOLID FCF AND EXCESS CASH GENERATION UNUTILISED ANNUAL CASH GENERATION Solid Normalised FCF c. £245M - £285M (on current earnings) £408m Dividend payout set at 40% (£100m) 70%: £285m Normalised annual ‘excess’ c. £145M - £185M 60%: £185m £2
Slide 28: Balance Sheet Strength
28 BALANCE SHEET STRENGTH HEADROOM TO COVENANTS; FOCUS ON BEING PRUDENT NET DEBT INVENTORY FINANCING – SHORT TERM FLEXIBLE FUNDING Net cash £80m at December 2017 £1.4bn SRC against £1.8bn inventory Debt covenants: 75%-85% inventory funded over year Interest cover: >3x ; Plenty of headroom Even
Slide 29: Financial Business Model Summary
29 FINANCIAL BUSINESS MODEL SUMMARY Distribution: A higher returning model Cash generation to support strategic decisions Strong balance sheet to support growth outlook OVERVIEW DISTRIBUTION: INTEGRATED IGNITE: DRIVING THE INCHCAPE CONCLUSION AND VISION ROUTE TO MARKET THE BUSINESS FORWARD OPPORTUNI
Slide 30: Q&A
Q&A
Slide 31: Ignite: Driving the Business Forward
POWERFUL MULTI-LAYERED GROWTH IGNITE DRIVING THE BUSINESS FORWARD
Slide 32: The Building Blocks Behind Ignite Strategy
32 THE BUILDING BLOCKS BEHIND IGNITE STRATEGY IGNITE FRAMES INCHCAPE'S STRATEGIC FOCUS GROWTH OPPORTUNITIES OPERATIONAL EXCELLENCE: MAXIMISING PROFIT AGAINST UNDERLYING MARKET TRENDS CONSOLIDATION: THE DRIVERS BEHIND VALUE-ACCRETIVE OPPORTUNITY OUR IGNITE STRATEGY IN FRAGMENTED MARKET INNOVATION: TA
Slide 33: Ignite: Driving the Business Forward
33 IGNITE: DRIVING THE BUSINESS FORWARD A STRATEGY TO CONTINUALLY STRENGTHEN INCHCAPE IGNITE: AN INTERCONNECTED STRATEGY, ENHANCING OUR OPPORTUNITIES FOR THE LONG TERM OPERATIONAL EXCELLENCE: MAXIMISING PROFIT AGAINST TRUSTED BY UNDERLYING MARKET TRENDS Supports our Enhances organic position as a an
Slide 34: Ignite: Delivery Since 2016 Launch
34 IGNITE: DELIVERY SINCE 2016 LAUNCH EARLY SUCCESS SUPPORTIVE OF STRATEGY KEY ACHIEVEMENTS TO DATE BUSINESS OPTIMISATION AND LEVERAGING SCALE Internal organisation enhanced with global and regional roles Achievement of procurement savings Delivery on revenue objectives CONSOLIDATION 7 Distribution
Slide 35: Enhanced Skills Across Group
35 ENHANCED SKILLS ACROSS GROUP TO DRIVE CONTINUED DELIVERY ORGANISATION ARCHITECTURE REFLECTIVE OF IGNITE FOCUS INVESTMENT IN KEY STRATEGIC SKILLS BEST IN CLASS EXPERTISE Customer Experience - Leveraged capability and expertise across Revenue streams (e.g. F&I, Used) Inchcape worldwide Levera
Slide 36: The Market Outlook
THE MARKET OUTLOOK UNDERLYING SUPPORT TO INCHCAPE’S OUTLOOK
Slide 37: A Strong Collection of Businesses
37 A STRONG COLLECTION OF BUSINESSES AT DIFFERENT STAGES OF PENETRATION AND GROWTH Passenger vehicle and commercial vehicle Inchcape Market per ‘000 ppl Other Markets 900 800 United States Italy Poland New Zealand 700 Estonia Canada Finland France Austria Germany 600 Greece Spain Switzerland Japan A
Slide 38: Exposure to Faster Growth Markets
38 EXPOSURE TO FASTER GROWTH MARKETS RECENT ACQUISITIONS FOCUSED ON HIGHER GROWTH MARKETS Passenger vehicle and commercial vehicle per ‘000 ppl 900 Inchcape Market 800 United States Italy Other Markets New Zealand Poland 700 Canada Japan Finland Estonia Recent Austria Switzerland France business win
Slide 39: Multi-Layered Profit Growth: Distribution Market Support
39 MULTI-LAYERED PROFIT GROWTH: DISTRIBUTION MARKET SUPPORT FY18 Group TIV growth not indicative of ‘norm’ 2017 GROUP Current UK performance exceptional PROFIT BY AUS REGION * ASIA 20% Singapore’s structural cyclicality well managed 35% by Inchcape EM 25% Total Industry Volume UK/EUR (TIV) gro
Slide 40: Operational Excellence
OPERATIONAL EXCELLENCE ENSURING ORGANIC GROWTH AGAINST TIV OUTLOOK
Slide 41: Operational Excellence
41 OPERATIONAL EXCELLENCE ENSURING ORGANIC PROGRESS AGAINST TIV OUTLOOK Ensuring that Inchcape is maximising the GROWTH OPPORTUNITES opportunity against all revenue streams Enabling opportunities possible though leveraging global scale OPERATIONAL CONSOLIDATION INNOVATION EXCELLENCE Leveraging best-
Slide 42: Dean Sykes / Steve Archer / Shaun Carroll
42 DEAN SYKES/ STEVE ARCHER/ SHAUN CARROLL DEAN SYKES STEVE ARCHER SHAUN CARROLL Emerging Markets Global Global Supply Operations Director F&I Director Chain Director >5 years in >10 years in Multi-industry supply Inchcape UK Inchcape UK chain expert Multi-industry retail Prior to Inchcape Prior to
Slide 43: Full Potential on Revenue Streams
43 FULL POTENTIAL ON REVENUE STREAMS REVENUE OUTSIDE NEW CARS INTEGRAL TO BUSINESS MODEL GROUP PROFIT MIX REVENUE STREAMS: A FOCUS BEYOND INDIVIDUAL PROFIT POOLS GROUP GROSS PROFIT SPLIT BEYOND DISCRETE PROFIT POOLS, MULTIPLE REVENUE STREAMS REINFORCE INCHCAPE’S STRENGTH BY (APPROXIMATE) ENHANCING T
Slide 44: Aftersales Opportunity
44 AFTERSALES OPPORTUNITY TARGETING THE GROWING ADDRESSABLE MARKET GROUP: AFTERSALES (c.40% GROUP GROSS PROFIT) IGNITE DEVELOPMENTS: 45 Units in operation (m) - 0-5 years old across Inchape markets Proprietary tools to optimise capacity 44 43 Customer innovation, e.g. express service 42 Focus on key
Slide 45: Aftersales Actions Determined
45 AFTERSALES ACTIONS DETERMINED BOTH SUPPLY AND DEMAND INITIATIVES Stage 1: Opportunities identified through span of performance benchmarking PROFIT OPPORTUNITY: Stage 2: Supply or demand issue identified Higher margin business Limited incremental costs SUPPLY DEMAND per hour sold; strongly leverag
Slide 46: Aftersales: Ethiopia Case Study
46 AFTERSALES: ETHIOPIA CASE STUDY SUPPLY INITIATIVE: FOCUS ON WORKFLOW ISSUE VEHICLE WALK-AROUND FACTORY PROCESSES Long lead times indicated CHECK DURING RECEPTION a supply challenge READY FOR SOLUTION TECHNICIAN Processes and workflows to transform productivity READY FOR Introduced a walk-around c
Slide 47: Aftersales: Ethiopia Case Study
47 AFTERSALES: ETHIOPIA CASE STUDY SIMPLE CHANGES CAN HAVE LARGE BENEFITS MEANINGFUL RESULTS FIRST FULL YEAR OF IMPLEMENTATION 2015 2016 2017 Motivated and empowered employees NPS 63.7% 64.7% 69.2% VEHICLE THROUGHPUTS 3,245 3,744 5,247 Customer satisfaction HOURS SOLD 132,055 153,219 201,546 Signifi
Slide 48: Aftersales: Chile Case Study
48 AFTERSALES: CHILE CASE STUDY DEMAND: EXPRESS SERVICE AND LEARNINGS FROM THE UK BMW CHILE CASE STUDY – DEMAND FOCUS: EXPRESS SERVICE Recent initiative to enhance demand LEARNINGS FROM UK RETAIL: MERCEDES Express service launch following successful trials in the UK Mercedes implemented express serv
Slide 49: Used Historically Less of a Focus
49 USED HISTORICALLY LESS OF A FOCUS MAXIMISING THIS REVENUE STREAM SPAN OF PERFORMANCE ACROSS MARKETS MODEL DEVELOPED (NEW/ USED VOLUMES) Proof of concept centre built 0.90 Processes defined and refined 0.80 Playbooks and communication tools developed 0.70 0.37 Used cars sold Initial roll out to ho
Slide 50: Used Focus on Stock and Process
50 USED FOCUS ON STOCK AND PROCESS STANDARDS BEING IMPLEMENTED FOCUS AREAS IGNITE DEVELOPMENTS 01 02 03 FROM TO ONLINE OFFERING MERCHANDISING PROCESS Price “cost up” Consistent, market referenced pricing of cars Negotiate with customer Competitive pricing Reduce the price until it meets di
Slide 51: Used: Russia Case Study
51 USED: RUSSIA CASE STUDY MEANINGFUL UPLIFT IN PERFORMANCE Driven by Ignite in 2H, little success prior to this INCHCAPE RUSSIA USED CARS SALES (UNITS) 12000 Used/ new ratio currently: 2016 - 1: 0.3 10000 2017 - 1: 0.6 8000 2018E - 1: 0.8 6000 FY17 success: 4000 Used GP +49% Growth in units sold: 6
Slide 52: Used: Chile Case Study
52 USED: CHILE CASE STUDY PILOTS HIGHLIGHT OPPORTUNITY IN DISTRIBUTION MARKETS Programme launched for Subaru DEC 80 cars 2017 238 units 5 times 54 KGBP Early days but delivering results (pilot results) Stock Sales per month Stock turn Gross margin Used/ new ratio currently: 0.4 118 cars 8 time
Slide 53: Dean Sykes / Steve Archer / Shaun Carroll
53 DEAN SYKES/ STEVE ARCHER/ SHAUN CARROLL DEAN SYKES STEVE ARCHER SHAUN CARROLL Emerging Markets Global Global Supply Operations Director F&I Director Chain Director >5 years in >10 years in Multi-industry supply Inchcape UK Inchcape UK chain expert Multi-industry retail Prior to Inchcape Prior to
Slide 54: Our Finance and Insurance Strategy
54 OUR FINANCE AND INSURANCE STRATEGY STRENGTHENING OFFERING AND PRACTICES F&I Revenue Growth Local Market Initiatives Inchcape Finance Market Products on way of Retention Forces offer Selling F&I Strategy Suitable Organisational Design Strong Market F&I leader OVERVIEW DISTRIBUTION: INTEGRATED IGNI
Slide 55: Focus on Purchase and Protection
55 FOCUS ON PURCHASE AND PROTECTION F&I A KEY ENABLER TO GROWTH F&I IGNITE STRATEGY HELPING CUSTOMERS PURCHASE THEIR VEHICLE HELPING CUSTOMERS PROTECT THEIR VEHICLE Deposit Monthly Future Payment Value Creating & developing market leading financial solutions Enabling customers to protect their i
Slide 56: F&I Global Review Conducted
56 F&I GLOBAL REVIEW CONDUCTED HIGHLIGHTED MEANINGFUL OPPORTUNITY INCHCAPE F&I MODEL NEW CAR FINANCE PENETRATION (MAIN MARKETS) - Agency commission model 82% 67% 65% - Insurance products include motor insurance as well 57% 48% as protective insurance products 42% 36% 26% 26% 26% 25% 23% 21% 17% GLOB
Slide 57: F&I Areas of Development
57 F&I AREAS OF DEVELOPMENT DRIVING PROFIT GROWTH F&I IGNITE STRATEGY INCHCAPE WAY OF SELLING FINANCE RETENTION STRATEGY - Implement clear and transparent ‘Inchcape - Most likely customer conversion is one with an existing Way Of Selling’ globally finance package - Ensure global best practices make
Slide 58: F&I Case Studies
58 F&I CASE STUDIES HIGHLIGHTING THE STRATEGY IN ACTION RUSSIA: VEHICLE CARE INSURANCE PRODUCTS ASIA/LATAM: MARKET FORCES - Leveraged our product NEW DEALS STRUCK relationship strategy THROUGH PANEL and launched a new Paint TENDER PROCESS: & Fabric protection product into Russia Chile BMW - Develope
Slide 59: F&I Medium Term Target
59 F&I MEDIUM TERM TARGET £30M INCREMENTAL PROFIT THROUGH F&I F&I Revenue Growth Local Market Initiatives Inchcape Finance Market Products on way of Forces Retention offer NEW TARGET: Selling F&I Strategy £30M INCREMENTAL MEDIUM-TERM PROFIT OPPORTUNITY Suitable Organisational Design Strong Market F&
Slide 60: Dean Sykes / Steve Archer / Shaun Carroll
60 DEAN SYKES/ STEVE ARCHER/ SHAUN CARROLL DEAN SYKES STEVE ARCHER SHAUN CARROLL Emerging Markets Global Global Supply Operations Director F&I Director Chain Director >5 years in >10 years in Multi-industry supply Inchcape UK Inchcape UK chain expert Multi-industry retail Prior to Inchcape Prior to
Slide 61: Leveraging Our Scale: Procurement
61 LEVERAGING OUR SCALE: PROCUREMENT OPTIMISING OUR GLOBAL COST BASE OPPORTUNITY DEVELOPMENTS TO DATE - £600m third party costs, with a vendor base of c.35,000 Creation and consolidation of the global procurement function - Growing business increases third party spend £20m annualised savings to date
Slide 62: Procurement Savings to Date
62 PROCUREMENT SAVINGS TO DATE CASE STUDIES: GLOBAL AND REGIONAL GLOBAL: DELL REGIONAL: UK RETAIL VEHICLE MOVEMENT Global assessment concluded in 2016: Regional assessment in 2016: Dell penetration across Inchcape was high: c.35K vehicles moved in the business 82% Laptops; 54% Desktops Local
Slide 63: Growing Business Enhances Opportunity
63 GROWING BUSINESS ENHANCES OPPORTUNITY CASE STUDY: M&A AND PROCUREMENT REGIONAL / M&A: PERU CUSTOMS SERVICES Regional assessment: BMW and Subaru had different customs service providers Different prices for a similar service PERU No price negotiations for many years One agreement signed: 2018
Slide 64: The Next Level of Procurement
64 THE NEXT LEVEL OF PROCUREMENT ENABLING GREATER GLOBAL BUYING THE NEXT STAGE OF THE PROCUREMENT JOURNEY PURCHASE TO PAY (P2P) PLATFORM - Drives the next level of savings; part of increasing IT-enabled solutions - Enables greater global procurement - Incremental saving per annum with iterative cons
Slide 65: Multi-Layered Profit Growth: Organic Growth Driven by Ignite
65 MULTI-LAYERED PROFIT GROWTH: ORGANIC GROWTH DRIVEN BY IGNITE OPERATIONAL EXCELLENCE / IGNITE REVENUE STREAM OPTIMISATION GLOBAL COST EFFICIENCIES OFFSETTING + Aftersales outperformance + Procurement savings ▬ Inflation + Increased Used penetration ▬ Reinvestment + Increased F&I profit OVERVIEW DI
Slide 66: Coffee Break
COFFEE BREAK
Slide 67: Consolidation
CONSOLIDATION WELL POSITIONED TO TAKE ADVANTAGE
Slide 68: Opportunity for Consolidation
68 OPPORTUNITY FOR CONSOLIDATION INCHCAPE’S SHARE: 1% Eastern Europe Central Asia Distribution-led regions with c.14M TIV, North Africa 20% of Global total Inchcape has 1% share Asia Middle East Pacifics with a global presence Africa Latin America OVERVIEW DISTRIBUTION: INTEGRATED IGNITE: DRIVING TH
Slide 69: Ignite's Consolidation Focus
69 IGNITE’S CONSOLIDATION FOCUS SUPPORTED BY GREATER OEM RELATIONSHIP FOCUS OEM relationship focus a key enabler to strategy GROWTH OPPORTUNITES Inchcape well placed to act as a consolidator Renewed internal focus alongside changing landscape and a need for stronger players OPERATIONAL CONSOLIDATION
Slide 70: Clear Change in Strategy Through Ignite
70 CLEAR CHANGE IN STRATEGY THROUGH IGNITE INCREASED ACTIVITY, ESPECIALLY WITH LARGE DISTRIBUTION DEALS Large-scale acquisitions IGNITE STRATEGY LAUNCHED 2016 1993 2007 2016 2017 2018 Subaru Australia Baltics multi- Indumotora BMW Estonia BMW Guam (TKM) OEM JLR Thailand PSA Rudelman Australia JLR DI
Slide 71: Bertrand Mallet / Ruslan Kinebas / Helen Cunningham
71 BERTRAND MALLET / RUSLAN KINEBAS / HELEN CUNNINGHAM Bertrand Mallet Ruslan Kinebas Helen Cunningham Chief Development Emerging Emerging Officer Markets CEO Markets HR Director Previously Mondelēz Previously Mitie, 10 years at Inchcape International, Cadbury Bureau Veritas Previously at Multi-year
Slide 72: Highly Fragmented Market
72 HIGHLY FRAGMENTED MARKET MOSTLY SMALL FAMILY-RUN BUSINESSES CATEGORY # OF COMPANIES * EXAMPLE PLAYER INCHCAPE ACQUISITIONS > 20 markets 4 companies Inchcape > 10 markets 5 companies Abdul Latif Jameel > 5 markets c.15 companies Sime Darby INCHCAPE’S PRIMARY CONSOLIDATION FOCUS > 3 markets c.25 co
Slide 73: Attractive Distribution Growth Markets
73 ATTRACTIVE DISTRIBUTION GROWTH MARKETS DISTRIBUTION MARKETS GROWING TWICE AS FAST AS GLOBAL AVERAGE THIRD PARTY DISTRIBUTION MARKETS: Small and Medium Distribution markets set to Small and Medium Regional TIV * market TIV market TIV outperform Global total market (All markets) CAGR (2018-23) (%)
Slide 74: Industry Trends Supportive of Consolidation
74 INDUSTRY TRENDS SUPPORTIVE OF CONSOLIDATION CATALYSTS FOR CHANGE SUPPORTIVE INDUSTRY TRENDS CATEGORY # OF COMPANIES * Contracts originally handed out in the 60s/70s. Some founders in family-run businesses have no succession plan > 3 markets c.25 companies OEMs looking for professional, well-funde
Slide 75: Inchcape a Natural Consolidator
75 INCHCAPE A NATURAL CONSOLIDATOR WELL PLACED GIVEN CAPABILITIES AND RELATIONSHIPS INCHCAPE’S CAPABILITY Proven success in integrating businesses Financial capability for larger deals Ability to build bolt-on contracts into existing regional structures, leveraging scale Strong OEM relationships ena
Slide 76: Opportunity Discovery Process
76 OPPORTUNITY DISCOVERY PROCESS INCHCAPE STRUCTURED TO SOURCE DEALS EFFECTIVELY SOURCES FOR DEALS OEM OEMs can drive deals OEM support required OEM PARTNER Inchcape strategic advantage given focus on relationships THIRD PARTY DISTRIBUTOR Typically involves relationship building as mostly fami
Slide 77: Types of Opportunities
77 TYPES OF OPPORTUNITIES COORDINATED STRATEGY TO CREATE OPTIMAL PORTFOLIO CONSOLIDATION OPPORTUNITY PLATFORM DEALS SMALLER SCALE / BOLT-ONS e.g. South America (Indumotora) e.g. BMW Estonia Create a strong platform for future opportunity in a particular Leveraging existing regional infrastructure an
Slide 78: Scaling Across Segments Optimises Value
78 SCALING ACROSS SEGMENTS OPTIMISES VALUE TARGETING DIFFERENT CUSTOMERS WITHIN A MARKET Target non-competing brands across the consumer OPTIMAL PORTFOLIO: HONG KONG EXAMPLE spectrum, including commercial vehicles COVERAGE ACROSS THE SPECTRUM WITH NON- PASSENGER VEHICLES COMPETING BRANDS Maximises l
Slide 79: Inchcape's Opportunity Heat Map
79 INCHCAPE’S OPPORTUNITY HEAT MAP GLOBAL STRATEGY MAPPED OUT PLATFORM SMALLER-SCALE/ DISTRIBUTION MARKET TIV INCHCAPE SHARE OF REGION DEALS BOLT-ONS SIZE (TIV) GROWTH CAGR DISTRIBUTION MARKET Latin America 1M 4% 3% Asia Pacific 3M 3% 4% Africa and Middle East 3.5M 6% 0.1% Eastern Europe 2M 6% 2% Lo
Slide 80: Screening Process
80 SCREENING PROCESS RIGOROUS TRANSACTION CRITERIA FOR ALL ACQUISITIONS RIGHT MARKETS RIGHT BRANDS FOR THE MARKET Good economic management - Product and price offering Long-term market growth trajectory - Complementary for the existing portfolio Strong underlying structural growth drivers VALU
Slide 81: Activity Progression Over Last 24 Months
81 ACTIVITY PROGRESSION OVER LAST 24 MONTHS SELECTIVE AROUND DEALS THAT PROGRESS MANAGEMENT MANAGEMENT BOARD APPROVAL APPROVAL APPROVAL HEADLINE AGREEMENT/ EXPLORATORY PRELIMINARY DUE CONFIRMATIVE DUE FINAL NEGOTIATION DISCUSSIONS DILIGENCE DILIGENCE Some terminated, Some ‘kept warm’ PROGRESS 7 DIST
Slide 82: Integration Planning Roadmap
82 INTEGRATION PLANNING ROADMAP HIGH IMPORTANCE TO ENSURE BUSINESS CONTINUITY PRE-DEAL PREPARATION POST-DEAL EXECUTION Due Diligence Integration Workshop Integration Project Continual monitoring Strong internal capability Integration workshop held Workshop output clearly Integration steering committ
Slide 83: Integration Delivery
83 INTEGRATION DELIVERY CREATING ALIGNMENT AND FOCUS TO DELIVER DEAL VALUE INTEGRATION PROJECT OEM Centralised PMO overseeing Acquired delivery of project plans & key business COMMERCIAL milestones whilst ensuring focus leadership team on business continuity: FINANCE Finance system migration Combi
Slide 84: Success of Strategy to Date
84 SUCCESS OF STRATEGY TO DATE 7 DISTRIBUTION DEALS IN THE LAST 24 MONTHS THAILAND CONTRACT WIN - 2016 SOUTH AMERICA ACQUISITION – 2016 AND 2018 BOLT-ON Jaguar Land Rover: Thailand Subaru: Chile, Colombia, Peru, Argentina Hino: Chile, Colombia 2017: OEM award recognising growth in 2017 2017: Double
Slide 85: BMW Endorsement Video
85 BMW ENDORSEMENT VIDEO PARTNERSHIP FOR 28 YEARS GLOBAL PRESENCE NEW BUSINESS ESTONIA - BOLT-ON DEAL (2017) Peru Australia Consolidates our existing presence in Latvia for BMW Chile UK First BMW-supported acquisition in 10+ years Estonia Russia GUAM - BOLT-ON DEAL (2018) First BMW contract in
Slide 86: Consolidation in Action: Case Study Latin America
CONSOLIDATION IN ACTION CASE STUDY: LATIN AMERICA
Slide 87: Latin America Platform Established
87 LATIN AMERICA PLATFORM ESTABLISHED 3 DEALS GIVES US SIGNIFICANT PRESENCE COSTA RICA CHILE FROM - 2016 TO - 2018 2 countries 6 countries Platform for 1 strategic OEM >6x 5 strategic OEMs continued profit and selected growth PANAMA COLOMBIA emerging OEMs c. £200M sales c. £800M sales c. 5,000 new c
Slide 88: Enhancing Growth Outlook
88 ENHANCING GROWTH OUTLOOK SOLID FUNDAMENTALS IN MARKETS ACQUIRED STRUCTURAL GROWTH OPPORTUNITY TIV GROWTH PASSENGER AND LIGHT COMMERCIAL VEHICLES PER 1,000 CAPITA ’18-’22 CAGR 800 COSTA RICA +5% 750 700 650 600 550 PANAMA +5% 500 450 400 350 300 COLOMBIA +5% 250 200 150 100 CHILE 50 0 +2% Germany
Slide 89: Creating a Regional Platform: Indumotora
89 CREATING A REGIONAL PLATFORM CASE STUDY: INDUMOTORA PLATFORM DEAL OVERVIEW PROCESS £231m all-cash deal Meaningfully enhanced position in South Family-run business America Meaningful expansion in South America. Succession driven acquisition Drove: Region with significant opportunity (o
Slide 90: Subaru Endorsement Video
90 SUBARU ENDORSEMENT VIDEO PARNTERSHIP FOR 25 YEARS STRONG BUSINESES NEW BUSINESS INDUMOTORA – Peru Australia TRANSFORMATIONAL DEAL Enabled us to enter South Chile Argentina America Expanded our relationship beyond Australia where we built Colombia New Zealand a strong position for the brand
Slide 91: Developing Key OEM Partnerships: Rudelman
91 DEVELOPING KEY OEM PARTNERSHIPS CASE STUDY: RUDELMAN PLATFORM DEAL OVERVIEW PROCESS £201m all-cash deal Scale presence in two very attractive Family-run business Central American markets Succession driven acquisition Entry into Central America, meaningful build Shifted Group further t
Slide 92: Right Brands for the Right Markets
92 RIGHT BRANDS FOR THE RIGHT MARKETS SUZUKI ATTRACTIVE IN EMERGING MARKETS ATTRACTIVE FOR EMERGING MARKETS LOW COST ASSEMBLY Assembly Plants Production (’000) Suzuki has built and maintained strong market positions in Costa Rica and Panama India 1.600 (52,0%) Japan 871 (28,3%) Hungary 250 (8,1%) Co
Slide 93: Enhanced Relationship with Suzuki
93 ENHANCED RELATIONSHIP WITH SUZUKI A COMPONENT OF RUDELMAN’S STRATEGIC VALUE STRATEGIC OEM RELATIONSHIP LONG-STANDING RUDELMAN REPRESENTATION ACQUISITION Rudelman acquisition enhances our relationship with this SINGAPORE COSTA RICA key brand Distributor Acquired since 1975 Distribution in 2018
Slide 94: Chinese OEMs: Future Proofing
94 CHINESE OEMS: FUTURE PROOFING ACQUISITIONS HAVE ESTABLISHED SOME KEY RELATIONSHIPS LONGER-TERM PARTNER PORTFOLIO CONSIDERATIONS Primarily a commercial vehicle manufacturer Strong range of passenger vehicles, including SUVs Chinese brands added to the Inchcape Large footprint in other Sout
Slide 95: JLR Colombia: Bolt-on Success
95 JLR COLOMBIA: BOLT-ON SUCCESS DEMONSTRATING THE PLATFORM BUILD OPPORTUNITY BOLT-ON DEAL BUILDING PRESENCE IN COLOMBIA BUILDING JLR PARTNERSHIP No payment for contract Brings existing OEM relationship into a new market Leverages the scale built through a transformational acquisition Colombia
Slide 96: LATAM: Continued Business Opportunities
96 LATAM: CONTINUED BUSINESS OPPORTUNITIES SEGMENT COVERAGE MATRIX DEMONSTRATES POTENTIAL OPPORTUNITY TO: CHINESE MARKET SUBARU HINO SUZUKI BMW JLR - Supplement strong organic growth with new BRANDS organic opportunity - Gap analysis Costa Rica - Expand brand exposure in existing markets Panama - Le
Slide 97: Capital Allocation
CAPITAL ALLOCATION M&A AND BUYBACKS
Slide 98: Firepower and Headroom to Invest
98 FIREPOWER AND HEADROOM TO INVEST DISCIPLINED FOCUS ON INVESTMENT HURDLES FINANCING AVAILABILITY ACQUISITION SPEND SINCE 2016 Comfort to leverage to 1x net debt /EBITDA v Would allow for at least c.£500m net debt position £451M £19M Replenished with excess cash per annum £201M EARNINGS ACCRETI
Slide 99: Capital Allocation
99 CAPITAL ALLOCATION EVIDENCE OF DISCIPLINED ALLOCATION OF CASH CASH UTILISATION PRIORITIES CUMULATIVE CASH RETURNS Excess cash post capex, Share buyback (cumulative) working capital, dividend Dividends (cumulative) 1,019M Value-accretive M&A opportunities £47M Remaining excess FCF distributed thro
Slide 100: Multi-Layered Profit Growth: Strategic Options
100 MULTI-LAYERED PROFIT GROWTH: STRATEGIC OPTIONS STRATEGIC OPTIONS Strong balance sheet and 60-70% FCF conversion M&A / CONTRACTS WINS BUYBACKS Large consolidation opportunity Excess cash returned to shareholders c.£500m spent over last 2 years £400m returned to shareholders since 2013 OVERVIEW DI
Slide 101: Future Trends and Opportunities
FUTURE TRENDS AND OPPORTUNITIES POSSIBILITIES TO STRENGTHEN BUSINESS
Slide 102: Industry Trends
102 INDUSTRY TRENDS PRESENTING OPPORTUNITIES INDUSTRY TREND ADVANTAGEOUS BUSINESS ATTRIBUTES Digitisation Greater control of response to trends as the ‘OEM in market’ operating across the value chain Exposure to less developed markets with lower vehicle penetration and Powertrain less developed infr
Slide 103: Bertrand Mallet
103 BERTRAND MALLET Bertrand Mallet Chief Development Officer 10 years at Inchcape Previously at Disney, Bain OVERVIEW DISTRIBUTION: INTEGRATED IGNITE: DRIVING THE INCHCAPE CONCLUSION AND VISION ROUTE TO MARKET THE BUSINESS FORWARD OPPORTUNITY
Slide 104: Digitisation: Example of Innovation
104 DIGITISATION: EXAMPLE OF INNOVATION ENSURING WE LEAD IN CUSTOMER EXPERIENCE A period of change in the Automotive industry GROWTH OPPORTUNITES OEM partners looking for those with solutions for the downstream side of their business Development of strong digital solution will OPERATIONAL CONSOLIDAT
Slide 105: Industry Not Known for the Best Experience
105 INDUSTRY NOT KNOWN FOR THE BEST EXPERIENCE CUSTOMERS DESIRE A DIFFERENT EXPERIENCE INDUSTRY LACKS CUSTOMER TRUST WE HAVE A CLEAR UNDERSTANDING OF CUSTOMER DESIRES Survey: Sector customer experience score * Retail 38 FRIENDLY AND OPEN Hospitality 37 Restaurants 35 Technology 24 FAST AND SIMPLE Le
Slide 106: A New Omni-Channel Experience
106 A NEW OMNI-CHANNEL EXPERIENCE OUR VIEW ON THE IDEAL CUSTOMER JOURNEY Research Consideration Purchase Delivery Ownership CUSTOMER Sources of info Transparent prices Seamless Convenient Access to gurus JOURNEY Personalised info Access to experts Easy checkout Helpful handover S
Slide 107: Customer-Centric, Omni-Channel
107 CUSTOMER-CENTRIC, OMNI-CHANNEL MODEL BEING REFINED AND LAUNCHED IN FIRST MARKET PILOT FOCUS Integrated omni-channel platform Customer-centric sales staff Data analytics and automation Optimised store formats Building for global scale OVERVIEW DISTRIBUTION: INTEGRATED IGNITE: DRIVING THE INCHCAPE
Slide 108: Fully Integrated Competitive Advantage
108 FULLY INTEGRATED COMPETITIVE ADVANTAGE INCHCAPE CAN MOVE QUICKER WITH FULL CONTROL Assembly Logistics Distribution Marketing Sales F&I Fulfilment Fully integrated OEM INCHCAPE DISTRIBUTION INCHCAPE RETAIL distribution Inchcape has a clear advantage with both Distribution Partnerships with OE
Slide 109: Thinking Mobile First
109 THINKING MOBILE FIRST ENHANCING OUR DIGITAL CAPABILITIES NUMBER OF VISITS THE WEB IS OUR FLAGSHIP Our customers are mobile first - treating our Digital dealership as our Flagship To be successful we must be data driven and have strong digital & analytical skills These skills are the founda
Slide 110: Case Study: Singapore SEO
110 CASE STUDY: SINGAPORE SEO BENEFITING THE BRAND POSITIONING SEO (SEARCH ENGINE OPTIMISATION) EXAMPLE: SEARCH OF TOYOTA’S MOST POPULAR 10 CARS Training and new tools used to optimised web February: Inchcape content first result for 5 out of the 10 car searches content for search Search improveme
Slide 111: Consolidation and Innovation
111 CONSOLIDATION AND INNOVATION RUDELMAN VIEW ON INCHCAPE’S DIGITAL STRATEGY YOAV RUDELMAN PREVIOUS OWNER OF RUDELMAN/ CURRENT CEO FOR COSTA RICA AND PANAMA Rudelman had made good progress in the digital journey, particularly in CRM However, as a family-run business, did not have the depth of resou
Slide 112: Electrification and Autonomous
112 ELECTRIFICATION AND AUTONOMOUS NEUTRAL TO INCHCAPE AND POSSIBLE OPPORTUNITES INDUSTRY TREND ADVANTAGEOUS BUSINESS ATTRIBUTES Digitisation Exposure to less developed markets with lower vehicle penetration and less developed infrastructure – further behind the curve with more net vehicle growth to
Slide 113: Electric Vehicles
113 ELECTRIC VEHICLES PENETRATION OF UNITS ON THE ROAD SLOW Change in powertrain does not alter DEVELOPED MARKET EV PENETRATION the Distribution business model Many Inchcape markets are much less likely to develop the required infrastructure in the medium-term INCHCAPE HAS Even in more developed mar
Slide 114: Aftersales Impact Neutral
114 AFTERSALES IMPACT NEUTRAL IMPACT ON AFTERSALES MANAGEABLE DEVELOPED MARKET EXAMPLE Aftersales risk to the Group is limited Aftersales gross profit impact to 2027 and offset by both the penetration Estimated 4% decline in market rate and the lag to car parc aftersales gross profit 100 98 96 1 1 C
Slide 115: EV Presents OEM Opportunities
115 EV PRESENTS OEM OPPORTUNITIES WELL POSITIONED FROM A BRAND PERSPECTIVE MORE MEANINGFUL OPPORTUNITY WITH BRAND WINNERS OEM R&D SPEND 2016 (£M) We are very well positioned in terms of 9,000 brand partners who continue to out 8,000 7,000 invest competition (R&D spend) 6,000 5,000 Smaller Inchcape p
Slide 116: Autonomous Vehicles / Mobility
116 AUTONOMOUS VEHICLES / MOBILITY MAJORITY OF VEHICLES WILL REMAIN PRIVATELY OWNED Current & Future annual vehicle sales, Private Vehicles New Shared Vehicles Million Units TIV Growth Private Vehicle Decline Urban-focused phenomenon ’15 – ’30 CAGR = 2% Will drive increased shared mobility 115 and l
Slide 117: New Profit Pools May Emerge
117 NEW PROFIT POOLS MAY EMERGE EMERGING BUSINESS OPPORTUNITIES Inchcape already supplies Ride-hailing per-mile estimated vehicles to fleets, including Uber cost breakdown Incremental profit opportunity 1.48 1.25 Inchcape has a strong 0.71 0.14 New B2B business capability and history in fleet model
Slide 118: Industry Trends: Greater Opportunity
118 INDUSTRY TRENDS: GREATER OPPORTUNITY DEVELOPMENTS THAT ALLOW US TO STRENGTHEN OUR BUSINESS INDUSTRY TREND ADVANTAGEOUS BUSINESS ATTRIBUTES Opportunity to strengthen our route to market Digitisation Further demonstrates Inchcape’s commitment to OEM partner of choice Powertrain Net neutral impact
Slide 119: The Inchcape Opportunity
POWERFUL MULTI-LAYERED GROWTH THE INCHCAPE OPPORTUNITY MULTI-LAYERED INVESTMENT PROPOSITION
Slide 120: Multi-Layered Profit Growth: Earnings and Cash Return Combined
120 MULTI-LAYERED PROFIT GROWTH: EARNINGS AND CASH RETURN COMBINED ANNUAL RETURN CONSIDERATION MARKET Inchcape market growth expectations DRIVERS ORGANIC Supported by increasing exposure to EMs GROWTH OPERATIONAL Revenue stream optimisation EXCELLENCE Global cost efficiencies ATTRACTIVE TOTA
Slide 121: Conclusion
POWERFUL MULTI-LAYERED GROWTH CONCLUSION DRIVING GROWTH THROUGH A FUNDAMENTALLY ATTRACTIVE BUSINESS MODEL
Slide 122: Powerful Multi-Layered Investment Proposition
122 POWERFUL MULTI-LAYERED INVESTMENT PROPOSITION GROWTH AND CASH RETURNS Distribution at our core: A highly cash generative and sustainable business model Strong and increasing weighting to high growth markets Ignite strategy driving organic performance ahead of market growth Continued consolidatio
Slide 123: Q&A
Q&A
Slide 124: Closing Remarks
124 CLOSING REMARKS CHAIRMAN Nigel Stein Chairman OVERVIEW DISTRIBUTION: INTEGRATED IGNITE: DRIVING THE INCHCAPE CONCLUSION AND VISION ROUTE TO MARKET THE BUSINESS FORWARD OPPORTUNITY
Slide 125: Thank You
POWERFUL MULTI-LAYERED GROWTH THANK YOU
Slide 126: Disclaimer
126 DISCLAIMER The information contained in this presentation in relation to Inchcape plc (“Inchcape”) and its subsidiaries (the "Inchcape Group") has been prepared solely for use at this presentation. It should not be used for whole or in part for any other purpose. The presentation is not directed