Inchcape Plc · LSE:INCH
Inchcape — Investor Day (October 2006)
142 slides from Inchcape's investor day presentation, Oct 9, 2006
Slide 1: Inchcape
+5 Inchcape
Slide 2: Inchcape Investor Day
Inchcape Investor Day 9 October 2006
Slide 3: André Lacroix, Group Chief Executive
André Lacroix Group Chief Executive
Slide 4: The day ahead
The day ahead 2.30pm André Lacroix Group Chief Executive Part One - Where are we now? Distribution Overview Retail Overview Part Two – The way forward 3.15pm Barbara Richmond Group Finance Director 3.40pm Q&A 3.55pm Coffee Break 4.15pm Spencer Lock Managing Director, UK Retail John McConnell Chief E
Slide 5: Investment case
Investment case • A unique business model with consistent financial track record • Margin enhancement through continuous business improvement • Diversity of earnings • Long standing relationships with high growth brand partners • Growth opportunities in both developed and developing markets • Strong
Slide 6: Historical five-year performance
Historical five-year performance Revenue (£bn) Operating Profit** (£m) CAGR: 9.6% 4.5 4.1 3.8 3.4 CAGR: 19.1% 189 3.1 172 134 109 88 2001 * 2002 2003 2004 2005 2001 2002 2003 2004 2005 * UK GAAP ** Before exceptional items
Slide 7: Where are we now?
part one VVhere are we now? CRORE ms Ab ede P alg 22 Inchcape
Slide 8: Unique business model
Unique business model Distribution Retail Developed countries Historical core Investment focus of Inchcape in last 5 years Developing countries Bases for future growth established
Slide 9: H1 2006 segmental results
H1 2006 segmental results Retail Distribution Volumes (‘000) 39 94 Sales (£m) 1,135 1,305 Trading margin (%) 2.5 7.0 Trading cash flow (£m) 51.2 142.4 ROIC (%)* 16.5 118.1 Number of sites 230 83 * Pre Lind acquisition
Slide 10: Diversity of earnings
Diversity of earnings Retail – sales Distribution - sales 10% 14% 17% 17% 6% 4% 3% 18% 27% 12% 64% 8% Australia Belgium Greece Hong Kong Singapore UK Australia Belgium Greece UK Other Other
Slide 11: Long-standing relationships
Long-standing relationships UK Australia Hong Kong UK UK UK 41 years 14 years 30 years 18 years 20 years 17 years Hong Kong Baltics Australia Chile 40 years 13 years 14 years 12 years Singapore Peru 39 years 8 years Belgium 25 years Greece 20 years
Slide 12: Strong relationships with high growth brands
Strong relationships with high growth brands Car industry global five Inchcape core partners** year* volume growth five year volume growth (CAGR%) (CAGR%) 4.2% 3.3% * 2000-2006 ** Toyota/Lexus, Subaru, VW, Mercedes, BMW
Slide 13: A very sound business model that provides major growth opportunities
A very sound business model that provides major growth opportunities Organic Expansion Distribution Retail Distribution Retail Industry consolidates towards bigger, Developed better retail countries LFL sales and profit growth Niche, emerging operations and mainstream managed by well • Outstanding c
Slide 14: Strong and experienced leadership team
Strong and experienced leadership team 1 year service CEO Global general management Andre Lacroix FMCG & retail career 6 months service 15 years service Finance CFO Asia Pacific Sales & marketing Chemicals & manufacturing Barbara Richmond William Tsui Primarily automotive career 6 months service 8 y
Slide 15: Distribution overview
Distribution overview “NOR ee MABE dele SIR B inchcape
Slide 16: Inchcape distribution advantages
Inchcape distribution advantages • Deep involvement in brand development and product innovation • Geographic spread: developed and developing countries • Benefits from Vertical Retail Integration • Limited capital investment: highly cash generative
Slide 17: Vertical retail integration benefits
Vertical retail integration benefits • All distribution markets our strategy to operate direct retail – up to 30% market share in large markets – Can be higher in small markets • Provides valuable retail customer and dealer expertise to grow markets – Total system economics understanding: Distributi
Slide 18: Distribution unit economics
Distribution unit economics Australia Belgium Greece Hong Kong Singapore Units (‘000) 36 28 25 12 38 Revenue (£m) 405 364 252 242 720 Operational margins (%) 6.6 3.6 6.6 11.7 8.7 Capital employed (£m) Fixed assets 8 4 8 17 14 Working capital (59) 25 (53) 18 42 ROIC (%) n/a 46 n/a 81 89 Capex (£m) 2
Slide 19: Growth opportunities in distribution
Growth opportunities in distribution Organic Expansion Distribution Retail Distribution Retail Developed countries UK, Europe • Market share Australia Niche, emerging Hong Kong, and mainstream • Aftersales Singapore brand opportunities • Market growth • Market share Developing • Aftersales Countries
Slide 20: Retail overview
Retail overview ry INR ORS ese “oh: BE iS ralky 22 Inchcape
Slide 21: Inchcape retail advantages
Inchcape retail advantages • Long standing scale operations in chosen countries – Investment in core regional markets – Scale with selected brand partners • Dedicated brand management • Diversified revenue streams: new, used, finance, aftersales • Attractive unit economics • Major growth opportuniti
Slide 22: Regional scale in retail
Regional scale in retail With focus on core regional markets for operational synergies Number of core % of country retail regional markets revenues they represent UK 4 80 Australia 3 100 Western Europe 6 95 Eastern Europe 5 90 * Pre Lind acquisition
Slide 23: Australia: three core regions
Australia: three core regions BRISBANE Northern • Subaru (2), Hyundai (2), Kia (2), Territory Mitsubishi (1) • Total of 1,900 units (2005) Queensland Western Brisbane SYDNEY Australia • Subaru (3), VW (2), Hyundai, Kia South New South • Total of 4,400 units (2005) Australia Wales MELBOURNE Sydney •
Slide 24: UK: four core regions
UK: four core regions LIVERPOOL • Mercedes cluster • 3,801 units (2005) North MIDLANDS • Mercedes, Toyota • 20,674 units (2005) Midlands West WEST MIDLANDS midlands • VW cluster • 5,061 units (2005) GREATER LONDON/SOUTH EAST • BMW + Mini, Toyota South • VW, Audi, Vauxhall, PAG, Ferrari • 33,101 unit
Slide 25: Diversified revenue streams
Diversified revenue streams Vehicles Aftersales New Parts Used Services & Light Repair Finance & Insurance Body & Paint Full retail and service value chain in the local market
Slide 26: Retail unit economics
Retail unit economics Typical sites Continental UK Australia Developing Europe markets Units - New 300 470 380 1,700 - Used 80 470 160 350 Revenue (£m) 5 21 16 30 Operating margin (%) 1.5 3.0 2.4 5.0 Capital employed (£m) 1 5 4 6 Fixed assets 1 2 2 4 Working capital 0 3 2 2 ROIC % 8 12 12 20
Slide 27: Growth opportunities in retail
Growth opportunities in retail Organic Expansion Distribution Retail Distribution Retail Developed • New cars countries • Drive industry • Used cars UK, Europe consolidation • Aftersales Australia • Higher system Hong Kong, share • Finance Singapore • Market growth • Higher system • New cars share D
Slide 28: The way forward
part two The way forward ‘23° “a OS 8 ac BEX
Slide 29: Inchcape strategy
Inchcape strategy One vision: To be the world’s most customer centric automotive retail group Two strategic Expand Strengthen priorities: In In existing, existing, emerging emerging Existing Existing core core businesses businesses and and new new markets markets Four enablers: Recognise Recognise t
Slide 30: Strengthen: increase profitability of outlets
Strengthen: increase profitability of outlets Strengthen Customer centricity Operational excellence to drive like-for-like to drive like-for-like sales growth profit growth Inchcape advantage Value drivers
Slide 31: Outstanding customer service
Outstanding customer service • Generates higher customer conversion and loyalty rates • Satisfies the emotional needs of customers: Creates a retail experience brand that is unique in the motor industry • Makes Inchcape the best OEM-partner with global scale and local excellence • Continued access t
Slide 32: Inchcape advantage
Inchcape advantage • In May we started systematic collection of customer service excellence best practices • Bank of over 100 best practices with proven bottom line impact • Global rollout will start in 2007 and take 18-24 months to implement Relentless push to drive like-for-like sales growth
Slide 33: The customer opportunity is huge
The customer opportunity is huge • Retail Brand Experience is an important source of Brand differentiation as product quality improves • Inconsistent Service level in the industry • Opportunity to improve customer retention beyond warranty
Slide 34: Key value drivers for like-for-like profit growth (1)
We will drive like-for-like profit growth through key value drivers (1) Distribution Vehicles Parts Quality of • Innovation and special editions • Service loyalty revenues • Market share increase • Trade vs retail sales • Marketing effectiveness •Effective pricing Flow through • Overhead cost manage
Slide 35: Key value drivers for like-for-like profit growth (2)
We will drive like-for-like profit growth through key value drivers (2) Retail Vehicles Service Parts • LFL volume • Capacity • Service loyalty growth utilization • Trade vs. retail sales Quality of • Model mix • Service mix revenues management • Used car • Revenue/car • Service efficiency • Effecti
Slide 36: Expand: invest with brand partners in 3 growth areas
Expand:plan to invest significantly with our brand partners in 3 growth areas • Retail expansion in existing markets – Developing – Developed • Create four additional scale retail markets • Identify new distribution opportunities – Existing partners – New partners Financial capacity to invest up to
Slide 37: Increase retail scale through acquisition and greenfield
Increase retail scale through acquisition and greenfield in existing markets United Kingdom Drive retail consolidations Australia Hong Kong Grow premium segment Singapore share and aftermarket Greece Increase owned retail share Belgium and develop multi-brand Balkans retail representation Baltics Ac
Slide 38: Create four additional profitable scale retail markets
Create four additional profitable scale retail markets with at least 25-30k units 6 Existing core markets 1 Russia 1 China 4 ? …… ? ……
Slide 39: Russia
Russia The opportunity Inchcape entry strategy • Import market experiencing strong growth RAPIDLY DEVELOPING A PRESENCE • Sales for 2006 forecast to be 50% above 2005 • JV with Independence for two Toyota sites in Moscow. Completed • Market concentration: • Acquisition of 75.1% of Axel St Petersburg
Slide 40: China entry strategy
China entry strategy The opportunity Inchcape entry strategy • Market growth continues Step 1 • Sales up by 25% in 2005 to 3.1m units. • Opening of 2 operations in Greater Shanghai: 1Q 2006 up 68% • Toyota and Lexus in Shaoxing (H1/2007) • Market concentration: • Lexus Shanghai (H2/2007) • Beijing (
Slide 41: Process and shortlist of additional markets
Process and shortlist of additional markets West Europe D E France V E Germany Systematic Assessment (in 2007) L O Spain P - Market growth potential E United States - Attractive brand partners D South Africa - Retail economics - Availability of scale entry D E Eastern Europe opportunity V Romania E
Slide 42: Develop new distribution opportunities
Develop new distribution opportunities Distribution Retail Developed countries Niche, emerging and mainstream brand opportunities Developing countries
Slide 43: Develop scale with partners
Develop scale with partners Existing New • Toyota, Lexus • Audi • Subaru • Honda • VW • Mazda • Mercedes • BMW
Slide 44: Our global organisation model
Our global organisation model Decentralised and Coordinated • Empowerment • Best practice benefits • Resources in markets • Consistent standards and systems to improve productivity • Fast decisions • International careers • More time with customers • Strategic guidance from the centre and support fr
Slide 45: We are changing the ways we set goals
We are changing the ways we set goals The Gold Standard Economic profit Gold EP Standard % OK OK 12% 13% Average Average 10% 10% Bad Bad 8% 7% Operation Operation Operation Operation Operation 1 2 3 4 5 Economic profit = PAT – WACC
Slide 46: Conclusion
Conclusion
Slide 47: A clear roadmap for the next stage of growth
We have a clear roadmap for the next stage of growth Sources of targeted profit growth Like-for-like profit growth Growth from expansion Developing market Developed market Developing market 2011 Developed market 2005
Slide 48: A clear roadmap for the next stage of growth
We have a clear roadmap for the next stage of growth Distribution Retail Multiple growth Developed countries + +++ opportunities Developing countries ++ +++ • Healthy balance between organic like-for-like Five year outlook growth and expansion opportunities • Attractive returns • Up to £800m invest
Slide 49: Our formula for delivering shareholder return
Our formula for delivering shareholder return Business platform Business Performance • Deep understanding of the sector • Strong cash generation from existing portfolio • Unique relevant business model • Every market contributing • Highly international geographical to profit growth footprint, spanni
Slide 50: Inchcape
+5 Inchcape
Slide 51: Barbara Richmond, Group Finance Director
Barbara Richmond Group Finance Director
Slide 52: Inchcape strategy
Inchcape strategy One vision: To be the world’s most customer centric automotive retail group Two strategic Expand Strengthen priorities: In In existing, existing, emerging emerging Existing Existing core core businesses businesses and and new new markets markets Four enablers: Recognise Recognise t
Slide 53: Gold Standard performance management
Gold Standard performance management • Complete new internal reporting system • New performance metrics appropriate for individual segments and sites • Drive gold Standard operating performance by value driver at site level including use of assets • Ultimate focus on economic profit (see appendix)
Slide 54: Reporting system
Reporting system • Management accounts for each of our 313 operating businesses • Profitability, productivity, asset utilisation and return information for each department • Key change in business analysis • Drill down/traffic lights
Slide 55: Performance metrics
Performance metrics • Shift from Distribution to Retail • Distribution - market share - return on sales • Retail - like-for-like - margin - flow through - productivity - capital intensity
Slide 56: Gold standards
Gold standards • Target setting • Stretch versus incremental • Multi-site comparison • Best in class • Profit and loss, balance sheet, cash flow, productivity and market share
Slide 57: Economic profit
Economic profit Group • Recurring profit after tax less cost of equity • Target for rate of growth and absolute EP over strategic plan period • More appropriate measure than ROCE Business Unit • Recurring after tax operating profit less notional/actual rent less cost of capital employed • Targets se
Slide 58: Gold standard performance
Gold standard performance • Economic profit is the target • Gold standards are the tools • Management accounts monitor actual and rate of progress • Site by site variances are significant
Slide 59: Use technology to free up time
Use technology to free up time • Automation of processes and information • Free up people to focus on front office activities • Transfer of best practice processes around the group • Consistent information for decision making
Slide 60: Disciplined allocation of capital
Disciplined allocation of capital • Investment criteria • Funding capacity • Evolution of the business model • Distributions to shareholders
Slide 61: Investment criteria
Investment criteria • Opportunities must meet strategic criteria • Primary focus on internal rate of return • Secondly economic profit generated over the investment period • Cash payback also important • Differential hurdles for Developing and Developed markets
Slide 62: Good capability to finance expansion opportunity
Good capability to finance expansion opportunity • Continued strong cash generation from existing businesses • Strong balance sheet • Significant borrowing capacity
Slide 63: Strong cash generation from operations
Strong cash generation from operations £m 180 154.8 157.7 156.6 160 142.4 140 120 100 80 60 51.2 40 20 12.2 16.6 16.9 0 2002 2003 2004 2005 Retail Distribution
Slide 64: Proforma balance sheet
Proforma balance sheet * 30th June 2006 £m Fixed assets Property 294 Other 112 Goodwill 125 Total 531 Working capital 38 Cash 79 Other net liabilities (10) Total net assets 638 Property comprises 46% of asset base and 13% of market capitalisation * Post Lind acquisition
Slide 65: Property strategy
Property strategy • Continue to acquire freehold property due to strategic commercial value • Use as part of overall funding security • Securitisation remains a future option
Slide 66: Funding capacity
Funding capacity • Ongoing cash generation • Strong balance sheet • Investment grade status Financial capacity to invest up to £800m
Slide 67: Distributions to shareholders
Distributions to shareholders • Progressive dividend policy • Ongoing dividend cover around 2.5 times recurring earnings • Priority to capital investment over buy backs if sufficient value generating opportunities
Slide 68: Sustainable financial performance
Sustainable financial performance Margin Impact • Increasing proportion of retail versus distribution profits • Increasing proportion of retail profits from developing markets • Mix change to smaller vehicles • Gold Standard performance • Focus on higher margin value drivers
Slide 69: Inchcape
+5 Inchcape
Slide 70: Spencer Lock, Managing Director Inchcape Retail UK
Spencer Lock Managing Director Inchcape Retail UK
Slide 71: Where are we now?
part one VVhere are we now? CRORE ms Ab ede P alg 22 Inchcape
Slide 72: Forecast new car market
Forecast new car market 3.0 2.57 2.49 2.44 2.46 2.49 2.5 2.33 2.33 2.40 2.0 1.25 1.25 1.49 1.24 1.20 1.23 1.17 1.17 1.5 1.0 1.20 1.17 1.17 1.20 1.23 1.25 1.25 0.5 1.08 0.0 2004 2005 2006 2007 2008 2009 2010 2011 Source: 2004 – 2007 SMMT Source: 2008 – 2011 Average JD Retail Fleet Power & Global Insi
Slide 73: Used car market
Used car market 7.4 £32.3bn £32.0bn 7.2 7.0 £30.0bn Volume millions 6.8 £28.1bn 6.6 7.3 £26.4bn 7.2 6.4 6.8 6.2 6.6 6.4 6.0 5.8 2001 2002 2003 2004 2005 Source: BCA Used Car Report
Slide 74: Car Parc: 1995 – 2005
Car Parc: 1995 – 2005 35 30 25 Vehicles millions 20 30.7 30.3 29.9 29.3 28.6 28.0 15 27.5 27.0 26.3 25.5 25.0 10 5 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: SMMT
Slide 75: Inchcape UK
Inchcape UK • Scale multi-franchise dealer group – 111 Dealerships – 93 locations – 20 Franchises – 4 Core regional markets
Slide 76: Inchcape UK continued
Inchcape UK continued • Inchcape is 2nd largest UK retail group based on turnover* • Clear strategy of scale with core partners – BMW/Mini – Mercedes-Benz – PAG – Toyota/Lexus – VW/Audi • Inchcape share of franchised dealerships circa 3% • Market consolidation ongoing * Source: AM Top 100
Slide 77: Inchcape UK continued
Inchcape UK continued • Multiple value drivers – New – Used – Finance & Insurance – Servicing – Parts • Franchised dealerships growing share of used car market • Sustainable Car Parc growth will help drive aftersales revenue
Slide 78: UK – top retailers
UK – top retailers Rank Dealer Name Turnover New Units Used Units 1. Pendragon 5,624 N/A N/A 2. Inchcape Retail 1,820 31,463 36,023 3. Sytner 1,780 N/A N/A 4. Arnold Clark 1,670 62,623 105,191 5. Lookers 1,291 44,368 33,753 6. Camden Motors 1,265 86,587 22,973 7. Daimler Chrysler 1,200 17,372 19,832
Slide 79: Dealership brands and locations
JAGUAR Auol Mercedes-Benz Cheltenham Basingstoke Canterbury Guildford Passenger Cars Burton Crawley Norwich Chester Derby Maidstone Nottingham Coventry Famham Tonbridge Southampton Derby Guildford Worcester Leicester Nottingham Liverpool Oxford Pre ll Sandhurst aa KIA) Nari West Bridgford Nottingham
Slide 80: Current portfolio
2: Inchcape Retail Southgort @ Llandudno © Warrington e Manafietd id @ Chester iq @ Nottingham Derby @ ™ Quous 1 2 - ES Oswestry @@ @ Loughborough Wolverhampton @ | @Burton z D Shrewsbui 7 Oxsw a Birmingham) @ cicester @ Kings Lynn Telford OD a > = Coventry @ uTomotive Bridgnorth @@ [oJ @ Corby — Na
Slide 81: UK retail statistics
UK retail statistics H1 2006 Total growth Like-for-like growth Volume New 11,695 12.1% 8.1% Used 19,583 7.1% 9.1% Revenue (£m) 730.3m 5.4% 3.4% Operating margin 2.9% 0.7 ppts 0.7 ppts
Slide 82: The way forward
part two The way forward ‘23° “a OS 8 ac BEX
Slide 83: Retail market trends
Retail market trends • Continued consolidation of UK dealer groups • Small/medium sized groups looking to exit • Increased investment costs • Stable new car market • Greater opportunities in used sales and aftermarket as franchised dealers grow share
Slide 84: Key value drivers for like-for-like profit growth
We will drive like-for-like profit growth through key value drivers Vehicle Service Parts Quality of • Retail/fleet mix • Service mix • Service/trade mix revenues • Scale OEM • Vehicle health • On-line parts relationships/ checks sales Internet • Centralised • Market area parts • Inchcape service bo
Slide 85: Like-for-like sales growth through improved conversion
We will drive like-for-like profit growth through key value drivers • Like-for-like sales growth through improved conversion rates Enquiries • ‘Big 4’ • Meet and greet CRD: Entering sales • Test drives process • Acknowledgement Conversion : sales and other products • Parking Customer • 7 KPIs – Trac
Slide 86: Summary
Summary • Stable market driving increased vehicle Parc • Multiple revenue streams – sales and aftersales • Successful core partner and regional concentration strategy • Significant growth opportunities – Further market consolidation – Gold Standards to drive economic profit
Slide 87: Inchcape
+5 Inchcape
Slide 88: John McConnell, Chief Executive Australia/New Zealand
John McConnell Chief Executive Australia/New Zealand
Slide 89: Where are we now?
part one VVhere are we now? CRORE ms Ab ede P alg 22 Inchcape
Slide 90: Distribution overview
Distribution overview “NOR ee MABE dele SIR B inchcape
Slide 91: Market growth – Australia
Market growth – Australia 900,000 180,292 177,000 800,000 150,578 173,087 700,000 105,510 138,064 116,236 600,000 500,000 400,000 608,804 601,000 588,511 589,985 553,673 540,240 529,452 300,000 200,000 100,000 0 2000 2001 2002 2003 2004 2005 2006 F Total passanger SUV
Slide 92: Subaru business
Subaru business 2005 Five year CAGR Vehicle volume 36,044 +6.2% Car Parc 318k +8.8% Parts £34m +14.1% Dealers 103 Dealer throughput 350
Slide 93: Subaru market share
Subaru market share Market YTD August volume Change Total market 642,383 -3.4% Subaru 24,896 +0.1% Subaru share 3.9% +0.2% Subaru segments Volume Growth Small 146,686 +3.0% Medium 56,605 -3.6% Compact SUV 51,534 -0.7% Total 254,825 +0.7% Subaru share 9.8% -0.1%
Slide 94: Business evolution
Business evolution Importer Advertiser Marketer Retail Sold cars to • Create brand • Grow brand Helped network dealers sell cars • Build network • Real time • Quality sales • Experiences • CRM CUSTOMER
Slide 95: Subaru market share by country
Subaru market share by country Volume (units) Market share Japan (excl mini cars) 108,649 2.8% Japan (inc mini cars) 258,217 4.4% USA 196,002 1.1% Australia 36,044 3.6% Canada 15,966 1.0% Switzerland 9,401 3.6% Germany 10,132 0.3% United Kingdom 8,926 0.4% Volume and share: 2005
Slide 96: Subaru Parts
Subaru Parts 40 35 30 25 £m 20 15 10 5 0 2001 2002 2003 2004 2005
Slide 97: Subaru parts
Subaru parts • Five year CAGR 14.1% • Separation of sales/marketing and logistics • Focus on 18 wholesale Parts dealers • Trade sales programs • Establishment of Preferred Repairer Network • Price matching initiative • High first pick availability
Slide 98: Retail overview
Retail overview ry INR ORS ese “oh: BE iS ralky 22 Inchcape
Slide 99: Top Australian auto retailers
Top 20 Australian auto retailers Rank Dealer name Sales volume Market share Turnover 1. AP Eagers 24,400 2.5% $1,076m 2. Automotive Holdings 22,000 2.2% $1,100m 3. WFM 19,000 1.9% $950m 4. Suttons 18,200 1.8% $910m 5. McGraths 14,500 1.5% $728m Australian Automotive 6. 12,900 1.3% $675m Group 7. Inc
Slide 100: Retail market trends
Retail market trends • Retail – Operating margin • Average 2.0% • Top 30% average 2.7% – Volume driven by ‘offers’ – Manufacturers require improved/standalone facilities – Consolidation phase as entrepreneurial owners look to exit – Manufacturers starting to accept corporate ownership
Slide 101: Australia: three core regions
Australia: three core regions BRISBANE Northern • Subaru (2), Hyundai (2), Kia (2), Territory Mitsubishi (1) • Total of 1,900 units (2005) Queensland SYDNEY Western Brisbane • Subaru (3), VW (2), Hyundai, Kia Australia • Total of 4,400 units (2005) South New South Australia Wales MELBOURNE Sydney •
Slide 102: Australia retail statistics
Australia retail statistics H1 2006 Total growth Like-for-like growth Volume New 5,715 17.7% 5.0% Used 2,132 30.9% 9.6% Revenue (£m) 111.1m 8.9% 2.6% Operating margin 3.9% 1.2 ppts 0.8 ppts ROCE 14.9% 5.0 ppts 5.9 ppts
Slide 103: Where are we going?
part two Where are we going? “EAR COX Ss AY pe e-§ Ae FA Se et 22 Inchcape
Slide 104: Distribution overview
Distribution overview “2 Vay (er cays ise ya rang 2= Inchcape
Slide 105: Product life-cycle
Product life-cycle Subaru Line-up 2005 2006 2007 2008 IMPREZA @ FORESTER @ @ Full Model Change LIBERTY Face Lift OUTBACK { New Product TRIBECA {
Slide 106: Key value drivers for like-for-like profit growth
We will drive like-for-like profit growth through key value drivers Vehicles • Innovation and special editions • Subaru experience Quality of revenues - Premium branding - Lead generation and management - Repeat sales Flow through • Marketing effectiveness • Overhead cost management • Vehicle Forwar
Slide 107: Key value drivers for like-for-like profit growth
We will drive like-for-like profit growth through key value drivers Parts • Service loyalty Quality of revenues • Decongestion of workshops utilising Centralised PDI Flow through • Strategic pricing of price sensitive items • Sales/employee • Stock level and availability Working capital • Stock age
Slide 108: Inchcape advantage
Inchcape advantage • 23% Inchcape volume/77% independent dealers • Consistent delivery of Subaru Experience • Visibility of consumer demand • Improved marketing effectiveness Increased sales and lower operating costs
Slide 109: Retail overview
Retail overview ry INR ORS ese “oh: BE iS ralky 22 Inchcape
Slide 110: Key value drivers for like-for-like profit growth
We will drive like-for-like profit growth through key value drivers Vehicles • Inchcape Advantage - Lead Generation & Management Quality of revenues - Repeat Sales • Used car growth Flow through • F&I penetration & income/car • Overhead cost management • Stock aging Working capital • Debtor manageme
Slide 111: Key value drivers for like-for-like profit growth
We will drive like-for-like profit growth through key value drivers Service & Parts • Quick service Quality of revenues • Customer retention programs Flow through • Utilisation of AutoNexus to decongest service facilities • Yield management • Stock aging Working capital • Debtor management
Slide 112: Inchcape advantage
Inchcape advantage • Improve monthly traffic 329 average (2006) • Improve conversion/traffic 74% (2006) • Improve orders/traffic 27% (2006) • Improve customer advocacy (Net promoter score) • Retail partner of choice • Improved operational performance
Slide 113: Summary
Summary • Market outlook is positive • Customer centric operational excellence • Organic growth: (i) Distribution - New products - Parts (ii) Retail - New /used - F&I - Parts & Service • Retail market consolidation opportunities
Slide 114: Inchcape
+5 Inchcape
Slide 115: Dale Butcher, Group Development Director
Dale Butcher Group Development Director
Slide 116: Business model: expansion
Business model: expansion Distribution Retail Developed • Consolidation countries • Fewer, bigger, better retailers Mainstream, niche or emerging • Market growth brands Developing • Network countries development • Opportunity to develop scale retail operations
Slide 117: Distribution: key opportunities
Distribution: key opportunities Niche Mainstream • Potential scale • Pressure to reduce Developed and capability costs may lead to a countries favour re-assessment of independent traditional National distributors Sales Company functions • Potential scale, • Initial scale and Developing capability an
Slide 118: Retail expansion: developed countries
Retail expansion: developed countries • Key market priorities – UK – Australia Current countries: – Belgium Expand retail footprint with brand partners – Greece – Chile New scale countries: – Continental Europe Consider if scale unit economic returns can be achieved • OEM retail partners Existing Ne
Slide 119: Western Europe – unit economics
Western Europe – unit economics New Unit sales per outlet - Western Europe 2005 500 450 400 Unit sales per outlet 350 300 250 200 150 100 50 0 UK France Germany Italy Spain Belgium Greece Market share of top 50 independent EBIT return on sales groups 2.5 50 45 2 40 35 1.5 30 25 1 20 15 10 0.5 5 0 0
Slide 120: Country growth
Country growth New car sales vs GDP per capita - 2005 and 2010 45,000 UK 40,000 JD Pow er 2005 Finland France JD Pow er 2010 35,000 Germany Italy Spain 30,000 GDP per capita (US$) Czech Republic Greece 25,000 Slovakia 20,000 Hungary Poland 15,000 Russia Estonia 10,000 Lithuania Latvia Romania 5,000
Slide 121: Eastern Europe: new car sales
Eastern Europe: new car sales Poland 446 Estonia Russia – foreign imports -6.9% 13.6% 30 12.5% 44%a 16% 20 9.0% 1,200 Czech Republic Latvia 17 30 236 23.7% 12.5% -3.9% 12.0% 225 15 27 Lithuania 127 21.5% 12.8% 315 561 216 . Slovakia -4.8% 6.0% Romania 32.7% 7.7% 7.9% 76 57 229 BOSNIA- 199 (a) CAGR i
Slide 122: Eastern Europe – unit economics
Eastern Europe – unit economics New units per outlet 1200 2005 Western Europe average 1000 800 600 400 200 0 Bulgaria Croatia Czech Estonia Hungary Latvia Lithuania Poland Romania Russia Republic 2005 2010 Source: GMAP handbook, JD Power
Slide 123: Eastern Europe – Inchcape presence
Eastern Europe – Inchcape presence Inchcape Baltics Inchcape Motors Poland Mazda / Jaguar / Land Rover VIR (Estonia / Latvia) – 5 outlets BMW / Mini retail in Warsaw and Mazda / Jaguar / Land Rover Distribution only (Lithuania) Wroclaw – 2 outlets 2005 summary 2,587 unit sales (distribution) Revenue
Slide 124: Key priorities – Eastern Europe
Key priorities – Eastern Europe Overview • Romania and Bulgaria EU entry approved for Jan 2007 Progress and strategy • Increase own retail presence in Romania and Bulgaria and develop potential retail acquisitions • Acquire retail businesses in the Baltics • Build scale in Poland through acquisition
Slide 125: Russia: Inchcape presence
Russia: Inchcape presence •Axel Axel “Piscarevski” “Axel Car” •Toyota Lexus Toyota Axel Volgogradsky “Pulkovo” Toyota Kievka Toyota, Lexus St Petersburg Moscow 2 Toyota retail & service centres 2 Toyota retail & service centres 1 Lexus retail & service centre Due to open towards end of 2007 1 Lexus
Slide 126: Key priorities – Russia
Key priorities – Russia Overview • Market continues to exhibit rapid growth – foreign brand sales in 2006H1 increased 55% year-on-year to over 400k units • Continuing stream of announcements by OEMs on new manufacturing facilities in Russia: Toyota, Nissan, VW Progress and strategy • Anchor points e
Slide 127: China: Inchcape presence
China: Inchcape presence Shanghai 1 Lexus dealership – due to open 2008 Heilongjiang Jilin Shanghai Xinjiang Inner Mongolia Liaoning Gansu Tianjin Beijing Qinghai Ningxia Hebei Shandong Shaoxing Shanxi Tibet Shaanxi Henan Jiangsu Shanghai Sichuan Anhui Hubei Hubei Chongqing Zhejiang Hunan Jiangxi Hu
Slide 128: Key priorities – China
Key priorities – China Heilongjiang Greater Beijing Area Parc 2,332k Overview Ji li % of China mkt19.9% Xinjiang • Continued strong Gansu Inner Mongolia n Liaoning growth in market Tianj - >30% CAGR Ningxia Hebeiin Beijing Greater Shanghai Qinghai Shandong Shanxi since 2001 Tibet Area ShaanxiHenan J
Slide 129: Other markets for consideration
Other markets for consideration India • Rapid growth in new car sales – forecast CAGR to 2010 is c.15%*. Total new car market c.1 million in 2005 • Initiating research to clarify market opportunity Turkey • Attractive economic fundamentals; relatively strong forecast GDP growth and start of negotiat
Slide 130: Other markets for consideration
Other markets for consideration South Africa • Favourable economic environment and strong consumer confidence resulted in expected 10% growth in new car sales in 2006 • Large scale established dealer groups lead sales in market USA • Mature market. Assess scale and profitable entry opportunities
Slide 131: Development team
Development team Roles and responsibilities • Together with each Business Unit, create opportunities to expand number of sites by acquisition or greenfield • Develop new markets using external parties where appropriate • Build on existing OEM relationships for both distribution and retail • Introduc
Slide 132: Development team
Development team Resources • Development team comprises 10 people • Primarily London-based team together with Country Managers in Russia and China to drive opportunities in these key markets
Slide 133: Development team – pipeline process
Development team – pipeline process Validation Business Plan Transaction Completion/ Market Post Investment Research Review • Market research • Target/site • Detailed financial • Due diligence • Monthly track versus • OEM opportunities confirmed evaluation economic profit • Legal agreements • Optima
Slide 134: Positioned to capture future opportunities
Positioned to capture future opportunities National players: - Multi-franchise - Single market The retailer of Chasing pack: choice globally -Retail or distribution specialists 16 for our OEM 14 partners Porsche France (PGA) 12 # brands (by manufacturer) Pendragon Berge Em il Frey 10 Jardines 8 Look
Slide 135: Inchcape
+5 Inchcape
Slide 136: André Lacroix, Group Chief Executive
André Lacroix Group Chief Executive
Slide 137: Investment case
Investment case • A unique business model with consistent financial track record • Margin enhancement through continuous business improvement • Diversity of earnings • Long standing relationships with high growth brand partners • Growth opportunities in both developed and developing markets • Strong
Slide 138: Inchcape
+5 Inchcape
Slide 139: 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 140: Appendix
Appendix it Inchcape
Slide 141: Definitions
Definitions ROIC (%) = Trading profit Business assets Business assets = intangible assets + property, plant & equipment + working capital = inventories + debtors + creditors Trading profit = operating profit before exceptional items and central costs Like-for-like A newly built, relocated or acquire
Slide 142: Economic profit
Economic profit 2005 H1 2006 Recurring profit after tax* 143.4 88.3 Minority interests (3.8) (1.9) Equity charge** (46.1) (25.8) Economic profit 93.5 60.6 * Cost of debt is included in profit after tax. Tax is included at the actual rate for the year ** This is based on an estimated of cost of equit