Inchcape Plc · LSE:INCH
Inchcape — FY2018 Earnings Presentation
35 slides from Inchcape's earnings presentation, Feb 28, 2019
Slide 1: FY18 Results
FY18 RESULTS 28 FEBRUARY 2019
Slide 2: Stefan Bomhard, Group Chief Executive
STEFAN BOMHARD GROUP CHIEF EXECUTIVE
Slide 3: FY18 Highlights: Resilient 2018 Performance
FY18 HIGHLIGHTS RESILIENT 2018 PERFORMANCE Distribution Mix continues Ignite enhancing Good cash strength continues to improve business generation Asia Distribution Distribution Value driver delivery in Capital allocation strong growth c.90% of profit key focus areas priorities unchanged Regional Fi
Slide 4: Continued Distribution Growth
CONTINUED DISTRIBUTION GROWTH >40% INCREASE IN SEGMENT TRADING PROFIT OVER 4 YEARS DISTRIBUTION POSITIONS TRADING PROFIT INCHCAPE Distribution growth WELL FOR: £375M supported by acquisitions 93% of and contract wins Group £261M Retail market headwinds 80% of Group Growth EM & APAC 88% of profit vs.
Slide 5: Strong Distribution, Weak Retail
STRONG DISTRIBUTION, WEAK RETAIL FY18 RESULTS SUMMARY % chg % chg FY 2018 (ACR) (CCR) Revenue £9,277.0m +3.6% +5.8% Operating £385.1m (5.3%) (1.4%) Profit PBT £356.8m (6.5%) (2.6%) EPS 65.0p (2.5%) Note: Operating profit, PBT and EPS pre exceptional items. 5
Slide 6: Strong Foundations for Growth
STRONG FOUNDATIONS FOR GROWTH 2018 VALIDATES STRATEGIC INTENT UNIQUE AND SUSTAINABLE IGNITE: GROWTH STRATEGY BUILDING CAPABILITY Distribution model core Underpins ambitions Investment in skills for future Greater value chain Structures our opportunity involvement drives returns Operational excellenc
Slide 7: Multi-Layered Growth Proposition
MULTI-LAYERED GROWTH PROPOSITION ATTRACTIVE TOTAL RETURN OPPORTUNITY ANNUAL RETURN CONSIDERATION MARKET − Inchcape market growth expectations DRIVERS ORGANIC GROWTH OPERATIONAL − Revenue stream optimisation EXCELLENCE − Global cost efficiencies and best practices ATTRACTIVE CONTRACT − Strong balance
Slide 8: Richard Howes, Chief Financial Officer
RICHARD HOWES CHIEF FINANCIAL OFFICER
Slide 9: Summary Income Statement
SUMMARY INCOME STATEMENT CHALLENGING YEAR IN RETAIL MARKETS FY 2018 FY 2017 CHANGE CHANGE £M £M ACR CCR Revenue 9,277 8,953 +3.6% +5.8% Operating profit 385.1 406.6 (5.3%) (1.4%) Profit before tax 356.8 381.6 (6.5%) (2.6%) Effective tax rate (%) 22.5 25.2 270bps 65.0 66.7 (2.5%) EXCEPTIONAL PBT Basi
Slide 10: Distribution
DISTRIBUTION FY 2018 FY 2017 CHANGE CHANGE +9% CCR growth as per historic £M £M ACR CCR segmentation (flat profit margin) Revenue 4,988 4,794 +4% +7% C.America acquisition profit accretive by £12m Trading profit 375 367 +2% +7% Yen tailwind in Australasia £16m Trading margin % 7.5% 7.7% (20 bps) Aft
Slide 11: Distribution Trading Profit
DISTRIBUTION TRADING PROFIT £6M £375M £367M £18M £1M £15M £2M FY17 Trading Translational Australasia * UK & Europe Asia Emerging FY18 Trading Profit FX Markets ** Profit Note: Regional profit growth at CCR; *Australasia includes a net £16m positive transactional FX impact y-o-y; **Emerging Markets i
Slide 12: Retail
RETAIL FY 2018 FY 2017 CHANGE CHANGE Continued diesel demand weakness £M £M ACR CCR and H2 WLTP pressure in the UK Revenue 4,289 4,160 +3% +5% Australia impacted by cooling property market Trading profit 27 65 -59% -59% Russia standout performance driven by Ignite Trading margin % 0.6% 1.6% (100 bps
Slide 13: Retail Trading Profit
RETAIL TRADING PROFIT £65M £1M £16M £16M £27M £37M FY17 Trading Profit Translational Australasia * UK & Europe Emerging Markets FY18 Trading Profit FX Note: Regional profit growth at CCR; * Australasia included £9m net property profit in FY17 which was not repeated in FY18 13
Slide 14: Income Statement Review
INCOME STATEMENT REVIEW FY 2018 FY 2017 2019 GUIDANCE £M £M INTEREST COST c.£28m Trading profit 401.4 431.8 Central costs (16.3) (25.2) Operating profit 385.1 406.6 Operating margin 4.2% 4.5% TAX RATE Finance charges / JVs Profit before tax (28.3) 356.8 (25.0) 381.6 23-24% Tax (80.2) (96.1) Effectiv
Slide 15: Cash Flow
CASH FLOW WORKING CAPITAL FY 2018 FY 2017 FY 2018 FY 2017 c.50% driven by improvements 2018 OPERATING CASH FLOW £M £M FREE CASH FLOW £M £M in the C.America acquisition Operating profit 385.1 406.6 Operating cash flow 505.6 532.5 Depreciation / amortisation 58.1 57.6 Net interest (27.1) (25.0) CAPEX
Slide 16: Other Items
OTHER ITEMS EXCEPTIONALS IFRS 16 REFINANCING £198m write-down c.£460m of lease RCF refinancing – Mostly UK & Europe commitments onto – Driven by upcoming – Reflecting trading results balance sheet from FY19 maturities – Non-cash – No cash impact – Refinancing existing – Fully retrospective commitmen
Slide 17: Capital Allocation
CAPITAL ALLOCATION PRIORITIES REMAIN UNCHANGED DIVIDEND Progressive dividend policy FY18 DPS 26.8p POLICY (target payout 40%) (Maintained y-o-y) 41% payout ratio FREE CASH FLOW UTILISATION CUMULATIVE CASH RETURNS Share buyback (cumulative) Excess cash post capex, Dividends (cumulative) £1,130m worki
Slide 18: Regions in Focus
REGIONS IN FOCUS
Slide 19: Retail Actions
RETAIL ACTIONS PLANS TO IMPROVE PERFORMANCE IN UK AND AUSTRALIA UK RETAIL 2019 IMPROVEMENT PLANS Diesel penetration in the UK has fallen Improved opening stock position from 48% in 2016 to 32% in 2018 Greater centralisation (ordering; promotions) WLTP also drove supply constraints in 2H18 for certai
Slide 20: Distribution Actions - Asia
DISTRIBUTION ACTIONS - ASIA ATTRACTIVE CHARACTERISTICS OF DISTRIBUTION STRONG RESULTS IN WEAKER MARKET PRODUCT PLANNING AND POSITIONING Unfavourable Strong 2018 2018 markets delivery Singapore market TIV (18)% FY18 Asia trading Vehicle growth Product management Share gains achieved Hong Kong market
Slide 21: Strategy Update
STRATEGY UPDATE
Slide 22: Full Potential of Revenue Streams
FULL POTENTIAL OF REVENUE STREAMS REDUCING SPAN OF PERFORMANCE ACROSS GROUP AFTERSALES INITIATIVES USED CAR INITIATIVES Group gross profit Group gross profit growth growth +7%* in double digits KEY SUCCESS KEY SUCCESS IN EMERGING MARKETS South America Russia South America 2018 Gross Profit 2018 Gros
Slide 23: Leveraging Global Scale
LEVERAGING GLOBAL SCALE DELIVERING AGAINST TARGETS FINANCE & INSURANCE PROCUREMENT £15M incremental income achieved in 2018 £32M annualised savings achieved to date 2 – ahead of plan – vs. £50M targeted savings – vs. £30M incremental income target 1 F&I profit growth ahead of vehicle sales Key areas
Slide 24: Invest to Accelerate Growth
INVEST TO ACCELERATE GROWTH 10 DISTRIBUTION DEALS SINCE 2016 CONSOLIDATION THEMES REGIONAL Acquisitions PLATFORM CREATION CONSOLIDATION BOLT-ONS enabled by Acquisitions that enable OEM-led consolidation with Small business wins supported focus on OEM further contract growth Inchcape preferred partne
Slide 25: Invest to Accelerate Growth: LatAm
INVEST TO ACCELERATE GROWTH: LATAM INTEGRATION SUCCESS OVER 2018 INDUMOTORA (South America) RUDELMAN (Central America) 2018 earnings ahead of plan Acquired in March 2018 – Success of Ignite initiatives – Expanded strategic Suzuki relationship – Cost efficiencies – Entry into market with strong mediu
Slide 26: Investing in Digital for Distribution
INVESTING IN DIGITAL FOR DISTRIBUTION 2019 LAUNCH PLANS DIGITAL OMNICHANNEL EXPERIENCE OMNICHANNEL PILOT FOCUS Started developing a new customer-centric Integrated omni-channel platform omni-channel experience in 2018 Customer-centric sales staff Designed to transform our customer proposition and Da
Slide 27: Future Trends: Ride Hailing
FUTURE TRENDS: RIDE HAILING TRIAL TO CAPTURE PROFIT POOL FOCUS ON FUTURE-PROOFING INCHCAPE Fleet management opportunity expected to grow alongside ride-hailing growth in some markets Opportunity for Inchcape to participate in business given existing servicing capabilities and Distribution strength T
Slide 28: Looking Ahead
LOOKING AHEAD 2019
Slide 29: 2019 Outlook
2019 OUTLOOK DISTRIBUTION PROFIT Resilient underlying growth (ex Yen) – Resilient performance in Asia, EM and Australasia – S.American growth offsetting Ethiopia supply constraints – Strong growth in Europe led by Greece and Baltics RETAIL PROFIT – Strong growth in Russia – Stabilisation in UK and A
Slide 30: Investment Proposition
INVESTMENT PROPOSITION GROWTH AND CASH RETURNS Distribution at our core: A highly cash generative and sustainable business model Strong and increasing weighting to higher growth markets Ignite strategy driving organic performance ahead of market growth Continued consolidation a material driver of va
Slide 31: Appendix
APPENDIX
Slide 32: Regional TIV Summary
REGIONAL TIV SUMMARY REGION 2016 Actual 2017 Actual 2018 Actual 2019 Est Australia 2% 1% (3)% (6)% UK 2% (6)% (7)% (2)% Greece 4% 12% 17% 13% Belgium 8% 1% 1% 0% Eastern Europe 19% 14% 11% 11% Singapore 41% 5% (18)% (7)% Hong Kong (21)% 6% (7)% *** 0% South America* (1)% 7% 7% 5% Russia (11)% 12% 13
Slide 33: Value Driver Disclosure: Aftersales and Vehicles
VALUE DRIVER DISCLOSURE AFTERSALES AND VEHICLES GROSS PROFIT MIX GROSS PROFIT YoY YoY (£M) CHANGE CHANGE FY 2018 CCR Ex Acqn* Vehicles 810 6.0% 3.4% Vehicles 62% Aftersales 492 8.7% 6.6% Aftersales 38% Note: *Acqn. refers to Central American acquisition in March 2018, YoY is CCR 33
Slide 34: Minor Segmentation Change
MINOR SEGMENTATION CHANGE EXPLANATION Business split • Historically, any of the revenue and profit made by DISTRIBUTION Retail sites in Distribution markets but attributable to Greater China Albania * Singapore Macedonia markets where we do not directly operate 100% of the Brunei Finland network wer
Slide 35: Disclaimer
DISCLAIMER The information contained in this presentation in relation to Inchcape plc The information contained in this presentation has been obtained from (“Inchcape”) and its subsidiaries (the "Inchcape Group") has been prepared company sources and from sources which Inchcape believes to be reliab