Inchcape Plc · LSE:INCH
Inchcape — Investor Day (May 2024)
38 slides from Inchcape's investor day presentation, May 23, 2024
Slide 1: In the Driving Seat: Our Distribution Model
IN THE DRIVING SEAT: OUR DISTRIBUTION MODEL 23 May 2024
Slide 2: Introduction & Overview
INTRODUCTION & OVERVIEW DUNCAN TAIT GROUP CEO 2
Slide 3: Agenda
Agenda Introducing our presenters OUR HOW OUR OEM FINANCIAL DISTRIBUTION TECHNOLOGY PARTNERSHIPS DYNAMICS MODEL SUPPORTS OUR OF DISTRIBUTION MODEL Duncan Tait Mark Dearnley Liz Brown Adrian Lewis Chief Executive Chief Digital Officer Chief Strategy Officer Chief Financial Officer 3
Slide 4: Key takeaways from today
Key takeaways from today Inchcape is well Inchcape’s Inchcape’s business positioned for growth proposition is model has attractive as the leading compelling and financial global automotive differentiated for characteristics Distributor OEMs + + 4
Slide 5: What is Automotive Distribution
What is Automotive Distribution Delivering a route-to-market for OEMs 1 2 3 Product planning – pricing, range, Logistics – shipping, importation Brand and marketing – online & offline spec and inventory management and warehousing media awareness, demand generation 4 5 6 Channel management – third pa
Slide 6: Our differentiated proposition for OEMs
Our differentiated proposition for OEMs Inchcape is a critical partner for our OEMs We manage and Through local Differentiated by our Proven by our develop our OEMs’ expertise supported technology long track record route-to-market by global capabilities of performance Underpinned by our Responsible
Slide 7: We support OEMs in smaller to medium-sized markets
We support OEMs in smaller to medium-sized markets A substantial opportunity for Inchcape “Inchcape distribution markets” Inchcape’s focus on smaller to medium sized markets 2023 TIV1 of New Passenger Vehicles in example markets High 25m 15m GDP growth Example non-INCH distribution markets Example I
Slide 8: Managing our independent retail network
Managing our independent retail network c.70% of our retail network is managed by third parties 8
Slide 9: Value-added services – driving resilience and growth
Value-added services – driving resilience and growth Strategic evolution from Vehicle Lifecycle Services % Parts: Finance and New Energy Used cars: ▪ Exclusive parts Insurance: vehicles: ▪ Leveraging distribution ▪ Innovative ▪ Battery services Distribution ▪ Digital Parts products ▪ Home-charging p
Slide 10: The transformation of Inchcape
The transformation of Inchcape A pureplay Distributor, with a diversified and scaled footprint Number of Distribution OEM Number of Distribution Annualised Distribution Distribution Volumes Partners Markets Revenues 350k £9.1bn 60 39 23 150k £3.3bn 20 2016 2023 2016 2023 2016 2023 2016 2023 Distribu
Slide 11: How Our Technology Supports Our Model
HOW OUR TECHNOLOGY SUPPORTS OUR MODEL MARK DEARNLEY GROUP CDO Scan to watch our previous “In the Driving Seat: Digital and Data Webinar” 11
Slide 12: Our technology enables our differentiated offering
Our technology enables our differentiated offering Integrated across the value chain Enables Inchcape to: More Customers + ▪ Deliver a seamless Improved Efficiencies customer experience ▪ Outperform for our OEMs + ▪ Attract the best people Higher Growth 12
Slide 13: Differentiating through our technology
Differentiating through our technology Global capabilities, delivered locally Digital eXperience Platform Data Analytics Platform Our global tech capability Digital Delivery Centres: Highly skilled Inchcapers developing and globally + supporting our digital platforms ▪ End-to-end omni-channel ▪ AI m
Slide 14: Our digital and data analytics capabilities
Our digital and data analytics capabilities Supporting every element of our Distribution value chain 1 2 3 4 5 6 Product Logistics Brand & Channel Retail Value-added Planning Marketing Management Services DAP - vehicle DAP - Parts AI DXP: DXP & DAP: DXP: DXP & DAP in S&OP: optimisation c.60%+ increa
Slide 15: Our OEM Partnerships
OUR OEM PARTNERSHIPS LIZ BROWN CHIEF STRATEGY OFFICER 15
Slide 16: Our OEM portfolio
Our OEM portfolio Diversified, scaled and prestigious Japan Europe China USA Selected OEM brands that Inchcape distributes passenger and commercial vehicles. Categorisation based on HQ origin. 16
Slide 17: Our OEM partnerships
Our OEM partnerships Long term relationships + new partnerships Long-standing OEM relationships: Recent OEM relationships: 50+ years 35+ years 25+ years Selected OEM brands that Inchcape distributes passenger and commercial vehicles.. 17
Slide 18: Distribution contracts
Distribution contracts Key dynamics Key drivers Key measures Future of success: of success: opportunities: ▪ Our value proposition ▪ Market share gains ▪ Conversion of in-house to independent distribution ▪ Global scale ▪ Volume growth ▪ Transition from competitor ▪ Network effect ▪ Customer satisfa
Slide 19: Building leadership positions for our OEM partners
Building leadership positions for our OEM partners Delivering for our OEMs in key markets Market leader Segment leader Segment leader Leading OEM performance Global Strategic in 7 of 14 markets in 4 of 7 markets in 3 of 6 markets in majority of our markets Agreement growing ▪ Bulgaria ▪ Latvia ▪ Ecu
Slide 20: Delivering for OEMs: Outperforming for Toyota in Europe
Delivering for OEMs Outperforming for Toyota in Europe Inchcape Market share growth in 2023 (versus 2019): Inchcape Toyota Europe vs 12.7% 11.5% Total Toyota Europe, 2019 - 2023: 11.3% 10.3% 7.2% 8.1% Market share 6.9% growth 4.5% 4.1% differential 100 bps 2.9% Belgium Greece Romania Bulgaria N. Mac
Slide 21: Delivering for OEMs: Outperforming for Mercedes
Delivering for OEMs Outperforming for Mercedes in the Americas and APAC 2019: Acquired & established 2020 to 2024: 2021 to 2024: Distribution network in Delivered across KPIs Continued expansion of our Colombia for Mercedes relationship with Mercedes Americas: APAC: ▪ Market share gains Uruguay Phil
Slide 22: Managing multiple OEMs in a market
Managing multiple OEMs in a market Leveraging our scale and capabilities Shared Retail Network Dedicated teams: Product Brand OEM Integration CRM Pricing Leveraged infrastructure: Warehouse Storage Technology Office Logistics Importation Legal Shared Responsible Business Leadership Operations HR / F
Slide 23: Building scale in a substantial market – Indonesia
Building scale in a substantial market – Indonesia A strong platform for future growth 2021: Establish 2023: Build scale 2024: Leveraging scaled market presence through M&A presence for new OEMs 150 300 3,500 2,500 Average approximate annual vehicle volumes for each brand (FY 2024 forecast) Targetin
Slide 24: OEMs' perspectives on Inchcape
OEMs’ perspectives on Inchcape 24
Slide 25: Financial Dynamics of Our Distribution Model
FINANCIAL DYNAMICS OF OUR DISTRIBUTION MODEL ADRIAN LEWIS CHIEF FINANCIAL OFFICER 25
Slide 26: Financial dynamics of Distribution
Financial dynamics of Distribution Key focus areas 1. 2. 3. Key financial metrics and Growth drivers Profit drivers commercial model 4. 5. 6. Working capital cycle Cash and returns Our robust and profile financial profile 26
Slide 27: Inchcape's financial profile in Distribution
Inchcape’s financial profile in Distribution Revenue, margins, cash flow Inchcape Distribution: £9.4billion 15% -18%* 5% - 7%* 60% - 70% Revenue Gross Margin Adjusted FCF conversion Operating Margin Growth Driver: Market volumes Vehicles: ▪ Organic growth ▪ Working capital Market share • Supply / de
Slide 28: Key commercial and financial characteristics
Key commercial and financial characteristics In Automotive Distribution KEY COMMERCIAL CHARACTERISTICS: Formal contract length 1 to 5 years INCOME STATEMENT Exclusivity Exclusive import rights for new vehicles & parts Revenue Recognition ▪ recognised on inventory sale to third parties (dealers or co
Slide 29: Distribution commercial models
Distribution commercial models How we operate Distribution Gross Margin of 15%-18%* Examples: Distribution Adjusted Operating Margin of 5%-7%* Retail OM of 1%-2%* Colombia – typical ▪ Brand: Mercedes ▪ Annual units: c.3k 1. Typical Distribution markets ▪ Third Party sites: 12 ▪ Inchcape sites: 0 ▪ c
Slide 30: Our growth drivers in Distribution
Our growth drivers in Distribution OEM contracts Average per contract contribution of contracts won, 2022 – 2023 (18 contracts) Y1 Y3 Y5 Typical Contract profile Market share Negligible 1% At least 2% Adjusted operating margin Negligible Profitable Accretive to Group Third Party / Owned Dealer sites
Slide 31: Inchcape's Distribution Profit Model
Inchcape’s Distribution Profit Model From Sales to Gross Profit to Operating Profit Product Costs Distribution costs Gross Profit Gross Operating Costs Operating Margin* Margin* Passed through Profile c.10% of sales % of operating Vehicles: c.85% costs Average vehicle Revenue contribution* Costs - c
Slide 32: Working capital
Working capital Key elements £2.3bn £(1.5)bn £(0.4)bn Inventory Inventory financing Net trade receivables (Vehicles, Parts) (OEMs and Banks) & trade payables ▪ Inventory profile split: c.80% new ▪ Mix of direct OEM trade terms ▪ Receivables: Dealer groups, vehicles, c.10% used vehicles, (1/3rd) and
Slide 33: Industry Working capital cycle
Industry Working capital cycle Key: Inventory flow Cashflow From order of inventory to sale OEM Distributor Stock Holding Shipping 30-60 days Dealers Consumers Transit time 30-90 days Stock Production Holding; Order 1.5 Months Bank OEM Bank terms Bank 30-90 Days 0-30 30-150 0-30 Pre-Production days
Slide 34: Distribution cash generation
Distribution cash generation Track record of driving a compound EPS story Key elements: Operating Working D&A Interest & Tax Capital FCF profit capital Growth in line Corporate debt, expenditure conversion Approx. >6% of sales Generally, neutral with revenue Inventory finance, Distribution is capita
Slide 35: Our robust financial profile in Distribution
Our robust financial profile in Distribution Supports our capital allocation policy 15-18% 5-7% Gross Margins Operating Margins Capital Allocation policy: ▪ Organic investment ▪ Dividends ▪ Value-accretive acquisitions 60% – 70% c.25% ▪ Share buybacks, as appropriate Free Cash Flow conversion ROCE o
Slide 36: Conclusion and Summary
CONCLUSION AND SUMMARY DUNCAN TAIT GROUP CEO 36
Slide 37: Key takeaways from today
Key takeaways from today Inchcape is well Inchcape’s Inchcape’s business positioned for growth proposition is model has attractive as the leading compelling and financial global automotive differentiated for characteristics Distributor OEMs + + 37
Slide 38: Q&A
Q&A