Inchcape Plc · LSE:INCH
Inchcape — H1 2014 Earnings Presentation
39 slides from Inchcape's earnings presentation, Jul 31, 2014
Slide 1: Premium Growth, Premium Returns: 2014 Interim Results
PREMIUM GROWTH PREMIUM RETURNS 2014 Interim Results 31 July 2014
Slide 2: André Lacroix, Group Chief Executive
ANDRÉ LACROIX GROUP CHIEF EXECUTIVE
Slide 3: Strong profit growth and cash generation
Strong profit growth and cash generation 3.5 Revenue Operating Profit* 168.0 5.2 Operating Margin* 5.0 3,313 3,336 170.0 3.3 153.7 5.0 3,109 4.8 4.6 150.0 137.6 4.5 3.1 131.8 4.6 4.4 2,930 £bn £m % 130.0 4.4 2.9 4.2 2.7 110.0 4.0 H1 2011 H1 2012 H1 2013 H1 2014 H1 2011 H1 2012 H1 2013 H1 2014 H1 201
Slide 4: Attractively positioned in a growth industry
Attractively positioned in a growth industry Global New Car Volume Inchcape Premium & Luxury Markets* 120.0 +4.7% 2010-2013 CAGR 120.0 +5.4% 2010-2013 CAGR 115.0 115.0 110.0 110.0 105.0 105.0 100.0 100.0 95.0 95.0 2010 2011 2012 2013 2010 2011 2012 2013 Global Growth Drivers: Global premiumisation o
Slide 5: Unique exposure to high margin growth markets
Unique exposure to high margin growth markets DISTRIBUTION RETAIL ONLY TRADING PROFIT TRADING PROFIT 81% 19% APAC AND EMERGING MARKETS 72% 71% 1% UK AND EUROPE 28% 10% 18% Strong in small markets with Distribution and selective in large markets with Retail Revenue and Trading Profit data 2014 H1 5
Slide 6: Industry leading positions with long standing brand relationships
Industry leading positions with long standing brand relationships Industry leading positions Length of partnerships Singapore Market leader Toyota Hong Kong Market leader Brunei Market leader JLR Macau Top 3 Guam Market leader Mercedes Saipan Market leader VW Bulgaria Top 3 Baltics Top 3 BMW Chile M
Slide 7: Strong underlying profit growth of +13.1%
Strong underlying profit growth of +13.1%* Underlying Operating Profit / Margin* 160.0 150.7 150.0 £m 140.0 133.2 +13.1% 130.0 120.0 H1 2013 H1 2014 OP Margin 4.4% 4.5% Group H1 Analysis Regional Margin Analysis GM 14.2% stable YoY North Asia 10.8% +30 BPS • Strong pricing power performance on New S
Slide 8: Continued discipline on costs
Continued discipline on costs 2008-2013 costs reduction: £154m Continuous productivity focus** Overheads / Revenue 30 78 10.0% £m % 9.8% (154) 9.7% 686 640 2008 Adj* Inflation Non LFL Cost 2013 H1 2012 H1 2013 H1 2014 Reduction * 2008 Adj reflects a £25m increase for the Musa acquisition ** Overhead
Slide 9: Strong FCF and capital discipline support TSR
Strong FCF and capital discipline support TSR Capital allocation policy H1 2014 highlights Support growth with WC investment £36m decrease since 31 Dec 2013 Capex investment to SAP/ADP roll-out in seven markets & drive growth and pricing power investment in growth in Emerging Markets Maximise shareh
Slide 10: Sustainable dividend growth
Sustainable dividend growth 3 year Interim dividend CAGR +20.5% 14.0 11.7 12.0 10.5 10.0 8.0 7.4 6.3 p 5.7 6.0 3.6 4.0 4.0 2.0 0.0 2011 2012 2013 2014 Interim Dividend Final Dividend £230m cash returned through dividends & the buyback in the past 18 months
Slide 11: John McConnell, Group Finance Director
JOHN McCONNELL GROUP FINANCE DIRECTOR
Slide 12: Summary profit & loss account
Summary profit & loss account H1 2014 H1 2013 Change £m £m % Sales 3,336.0 3,312.9 0.7 Operating profit* 168.0 153.7 9.3 Net financing costs (5.9) (6.7) 11.9 Profit before tax* 162.1 147.0 10.3 Tax rate (%)** 24.0 25.0 (100)bps Basic adjusted EPS (p)* 27.1p 22.9p 18.3 * Pre exceptional items ** Unde
Slide 13: Impact of currency on operating profit
Impact of currency on operating profit* 2013 @ actual 2014 @ 2013 2014 @ actual H1 2014 (£m) Impact exchange rates actual rates exchange rates Australasia 42.0 51.8 43.5 (8.3) Europe 10.4 11.8 11.4 (0.4) North Asia 28.0 31.4 29.1 (2.3) South Asia 15.4 40.4 36.8 (3.6) Emerging Markets 33.3 24.5 21.7
Slide 14: Regional analysis: trading profit
Regional analysis: trading profit H1 2013 H1 2014 Emerging Markets Emerging Markets 13% 17% Australasia Australasia 26% 27% £160.9m UK £162.6m 23% UK 24% North Asia North Asia 17% 18% Europe Europe South Asia 7% South Asia 6% 10% 12% Note: Pre exceptional items Excluding property profits in Emerging
Slide 15: Group: trading profit
Group: trading profit Reported Growth +7.7% (+18.6% at constant currency) Underlying Growth +1.0% (+10.9% at constant currency) 11.1 180.0 4.1 1.5 1.1 1.0 160.0 (0.6) £m (5.4) 179.9 167.1 168.8 140.0 H1 2013 Emerging UK Europe North Asia Australasia South Asia H1 2014 Property H1 2014 Markets Underl
Slide 16: Net finance costs
Net finance costs H1 2014 H1 2013 £m £m Bank and loan interest 0.6 1.1 Stock holding interest (9.3) (10.4) Interest on private placement notes (1.4) (1.4) Pension interest net 2.6 2.7 Other including capitalised interest adj. 1.0 0.6 Interest excluding mark to market (6.5) (7.4) FV on private placem
Slide 17: Cash flow
Cash flow Operating cash flow H1 2014 H1 2013 Free cash flow H1 2014 H1 2013 Net cash H1 H1 2013 £m £m £m £m 2014 £m £m Operating profit* 168.0 153.7 Operating cash flow 201.3 87.7 Free cash flow 148.3 6.7 Depreciation / amortisation 22.0 20.2 Net interest (7.4) (5.9) Share issue 0.9 6.8 Other non c
Slide 18: Guidance – Full Year 2014
Guidance – Full Year 2014 Tax rate (underlying) 24% Interest cost (excl. mark to market) c £14m Capital expenditure £60m Net cash c £190m* * Pre share buyback 18
Slide 19: Business Updates and Outlook
BUSINESS UPDATES AND OUTLOOK
Slide 20: Execution of our Top Priorities to deliver our Customer 1st Strategy
Execution of our Top 5 Priorities to deliver our Customer 1st Strategy MARKET INTELLIGENCE SUPPLY & MARKETING & INNOVATION & FORECASTING WORKING CAPITAL MANAGEMENT DEALER NETWORK WORLD CLASS RETAIL CUSTOMER SERVICE DEVELOPMENT STANDARDS PERFORMANCE GLOBAL IT MANAGEMENT CAPEX & INVESTMENT INFRASTRUCT
Slide 21: 2014 outlook
2014 outlook • Broad-based growth across markets and categories • Robust growth in New vehicles and good visibility into H2 • Favourable trends in the New vehicle segment supportive of Aftersales, 50% of Group Gross Profit, as the 1-5 year Car Parc grows across the majority of markets • Used cars wi
Slide 22: UK: Industry leading margin
UK: Industry leading margin 2014 TIV est. FY estimate: 2.45m, +8% vs. 2013 2014 H1 • LFL sales +13%, fuelling growth of the 1-5 year Car Parc • VW Stockport capacity expansion and refurbishment • YouTube New car videos launched to drive conversion 2014 H2 • Construction of VW West London site to be
Slide 23: Europe: Double digit profit growth
Europe: Double digit profit growth Belgium Greece FY estimate: 533k, flat vs. FY estimate: 75k, +21% vs. 2014 TIV est. 2013 2013 2014 H1 • Market share +40 bps • H1 new car market growth year on year of 24% • Successful launches of • Consolidated leadership mid-size diesel variants position: market
Slide 24: North Asia: Record trading profit
North Asia: Record trading profit Hong Kong / Macau / Guam / Saipan 2014 TIV est. HK FY estimate: 52k, +8% vs. 2013 2014 H1 • Successful new model launches: including Toyota Noah, Hiace, Ractis and Lexus CT200h • HK Market share +440 bps year on year 2014 H2 • Leverage the start of the multi-year go
Slide 25: South Asia: Underlying trading profit +39%
South Asia: Underlying trading profit +39% Singapore / Brunei 2014 TIV est. Singapore FY estimate: 44k, +29% vs. 2013 2014 H1 • Start of the Singaporean market recovery: H1 growth +18.5% • Market share +440 bps year on year • COE price down c13% since Dec 2013* 2014 H2 • Leverage launches of new mod
Slide 26: Australasia: Record trading profit
Australasia: Record trading profit Distribution Retail 2014 TIV est. 1,120k, -1% vs. 2013 2014 H1 • Subaru market share • Strong performance by stable year on year Trivett: trading margin 3.7% despite supply vs. medium target of 3.5% restrictions • Increased Aftersales • Successful launches of produ
Slide 27: Emerging Markets: Double digit revenue growth
Emerging Markets: Double digit revenue growth South America Russia & Eastern Europe •Building on the successful 2013 opening •Luxury and premium brands continuing to of new flagship sites in Santiago and Lima outperform the local and mass brands in Russia, •Leveraging significant growth in the BMW a
Slide 28: Looking Ahead
® Inchcape LOOKING AHEAD
Slide 29: Broad-based growth across markets and categories
Broad-based growth across markets and categories GDP TIV CarParc 1-5yrs 5.6% • 21 Markets APAC / 4.5% • 52% of Revenue 4.0% Emerging 3.3% 3.2% markets • 70% of Trading Profit • 6.6% Trading Margin 0.8% CAGR: 2010-13 2013-18 GDP TIV CarParc 1-5yrs 2.3% 2.0% • 5 Markets 1.4% 1.3% • 48% of Revenue 0.7%
Slide 30: Premium Growth delivering Premium Returns
Premium Growth delivering Premium Returns Growth industry Premium and luxury brand partners Industry leading positions with scale advantage Diversified earnings streams Differentiated strategy ‘Customer 1st’ Executional advantage ‘Formula Inchcape’ Disciplined capital allocation 30
Slide 31: Appendix
® Inchcape APPENDIX
Slide 32: 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 33: Strong 2014 model line-up
Strong 2014 model line-up Land Rover / VW / Audi / BMW / MINI Toyota / Lexus Jaguar Mercedes Benz Subaru Porsche MINI HB F Type Coupe C Class WRX STI Lexus ES Macan H1 4 Series Range Rover LWB GLA Altis A2 2 Series XF Noah A3 Cab 4 Series Conv Evoque S Coupe Liberty Aygo Polo H2 X4 Outback Lexus NX
Slide 34: Capex investment
Capex investment • Capacity expansion • Chile £12m • Russia • Ethiopia • Greenfield expansion £4m • Audi Oldham • IT upgrades £24m • Maintenance capex £20m • Total £60m 34
Slide 35: Segmental performance
Segmental performance H1 2014 H1 2013 Change £m £m % Sales Distribution 1,231.8 1,287.8 (4.3) Retail 2,104.2 2,025.1 3.9 3,336.0 3,312.9 0.7 Operating profit* Distribution 132.3 115.6 14.4 Retail 47.6 51.5 (7.6) Central costs (11.9) (13.4) 11.2 168.0 153.7 9.3 Operating margin Distribution 10.7 9.0
Slide 36: Distribution: trading profit
Distribution: trading profit H1 2014 H1 2014 Underlying Trading margins 132.3 Reported Property 11.1 Distribution* 9.3% +80 BPS Profit Delta H1 2014 South Asia* 9.7% +80 BPS 121.2 Underlying South Asia 4.1 UK 25.5% +500 BPS UK 1.4 Europe 4.1% +20 BPS Europe 1.1 North Asia 10.8% +30 BPS North Asia 1.
Slide 37: Retail: trading profit
Retail: trading profit H1 2014 Trading margins H1 2014 47.6 Retail 2.3% -20 BPS Australasia 1.5 Australasia 3.7% +40 BPS Europe - -20 BPS Europe (0.1) UK 2.6% -40 BPS Emerging Markets 0.7% -60 BPS UK (2.0) Emerging (3.3) Markets H1 2013 51.5 40.0 45.0 £m 50.0 55.0 Note: Pre exceptional items All num
Slide 38: Broad geographic spread - truly international
Broad geographic spread - truly international United Kingdom R Australasia South Asia North Asia Europe 34.1% of '13 Group Revenue 20.9% of '13 Group Revenue 5.7% of '13 Group Revenue 8.7% of '13 Group Revenue 9.6% of '13 Group Revenue 20.7% of '13 Group Trading 25.8% of '13 Group Trading 9.7% of '1
Slide 39: 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