First half 2020 results 30 July 2020
Duncan Tait Group CEO
Gijsbert de Zoeten Group CFO
Income statement Change yoy% Covid-19 had a material impact 1H20 1H19 Reported Constant FX Organic £m (unless otherwise stated) Topline outperformance vs market • Revenue 3,019 4,725 (36)% (35)% (29)% volumes Operating profit 28 180 (84)% (84)% Market closures had a significant • impact on results Operating margin % 0.9% 3.8% (290)bps (290)bps Profit before tax 9 156 (94)% (94)% Exceptional charges of £198m; majority • (£185m) related to impairment Basic adjusted EPS (p) (0.6) 28.6 (102)% of goodwill (Retail) and various sites Dividend per share (p) - 8.9 (100)% First half 2020 results – 30th July 2020 4 NB. all figures are stated pre-exceptional items
Distribution Change yoy% Results hit by wide-spread market closures 1H20 1H19 Reported Constant FX Organic £m (unless otherwise stated) Geographic diversification helped • Revenue 1,730 2,421 (29)% (27)% (29)% support performance Operating profit 46 160 (71)% (71)% Positive operating profit albeit at lower • levels % margin 2.7% 6.6% (390)bps (400)bps First half 2020 results – 30th July 2020 5
Distribution operating profit bridge 160 58 24 11 18 46 3 1H19 Asia Australasia Europe Americas & Africa Translation FX 1H20 operating profit operating profit First half 2020 results – 30th July 2020 6 NB. figures above are quoted in £m
Retail Change yoy% The two key markets impacted by prolonged closures 1H20 1H19 Reported Constant FX Organic £m (unless otherwise stated) Revenue 1,289 2,304 (44)% (43)% (30)% UK and Russia (>90% of the segment’s • sales) impacted by >10 weeks of Operating profit (18) 20 (188)% (190)% closures % margin (1.4)% 0.9% (230)bps (230)bps Limited flexibility of costs weighed • on performance First half 2020 results – 30th July 2020 7
Cash flow: very effective inventory management Supported by collaboration with OEMs Net cash bridge (£’m) Lower operating profit offset by strict Free-cash flow = £(5)m vs £25m in 1H19 • working capital discipline, and reduced 22 12 capex and taxes 28 13 38 Inventory management in collaboration • 32 16 with our OEM partners 0 9 103 32 Dividend and share buyback 89 • cancellations helped preserve cash Opening Net Cash Operating profit lease payments Working capital Pension/ NCI/ Other Net interest and tax Net capex Net M&A Dividends Share buybacks FX / Other Closing Net Cash @ Jun-20 [IAS17] @ Dec-19 [IAS17] D&A net of First half 2020 results – 30th July 2020 8 NB. Closing (net debt) on an IFRS16 basis was £(262)m at end of June-2020; compares to £(250)m at Dec-2019
Liquidity update: strong balance sheet Liquidity position further strengthened Net cash £103m £(187)m £(210)m £89m Liquidity of >£1,000m vs £889m in Dec-19 • Total Liquidity £889m £600m >£700m >£1,000m Collaboration with OEMs has supported • the liquidity position during market lockdowns 530 Repaid UK CCFF (£100m) in July; liquidity • remains available until Dec-20 480 31-Dec-19 07-Apr-20 20-May-20 30-Jun-20 Available cash RCF headroom CCFF headroom First half 2020 results – 30th July 2020 9
Covid-19 update: key market status 7 th April 21 st May Status today Australia Asia-Pac Market status (today) Hong Kong Open: 30 markets • Singapore Closed: 3 markets • Belgium Greece Europe Romania Russia UK Chile Americas & Africa Colombia Peru Open Costa Rica Key: Closed Ethiopia Group 30% 40% 95% ( open markets % 2019 revenues) First half 2020 results – 30th July 2020 10
Sales trend gradually improving as markets reopen Group organic revenue growth (yoy%) development 1Q20 Apr-20 May-20 Jun-20 1Q20: (6)% (18)% Aftersales sales growth 2Q20: c.20% above Vehicles (51)% (59)% (76)% Jan-Feb: performance Markets representing c70% Markets representing c60% Markets (mainly Americas) • • • • ahead of internal of revenues were closed of revenues were closed representing c10% of expectations revenues were closed Singapore closed in early- European Distribution • • March: initial impact of April operations started to Singapore and UK • • closures (outside of Asia) reopen in mid-May reopened started to be felt First half 2020 results – 30th July 2020 11
Market context for cost-restructuring Inchcape markets: new car volume evolution IHS Automotive forecasts (July) (29)% 14% 2019 2020 2021 First half 2020 results – 30th July 2020 12
A leaner organisation, fit for focused growth 2019-PF 1 Overhead Restructuring overheads savings costs £855m >£90m c.£70m Following significant Reducing headcount (10%), Process well-underway Retail disposals third-party spend and footprint rationalisation c.50% of savings retained when Cash-cost c.£50m revenue recovers First half 2020 results – 30th July 2020 13 1) 2019-PF: 2019 reported figure adjusted for disposals and acquisitions
Digital: continuing our investment Key digital milestones in 1H20 Digital leads drove > 9,000 orders • Increased efficacy of digital marketing • Completed testing on multi-brand & language platform • Current digital priorities Omni-channel: roll-out Melbourne-trial to other markets • Analytics: use digital information and data to drive decisions • First half 2020 results – 30th July 2020 14
M&A: alive to the consolidation opportunity Establishing a strong platform in a new geography Platform deal Strategic move to enter a new geography and leverage our global scale e.g. Indumotora (2016) & Rudelman (2018) – Americas OEM Partner Leveraging existing regional infrastructure Smaller scale Strengthens our regional presence and broadens our brand exposure e.g. BMW Estonia (2017) & JLR Colombia (2018) Selling OEM looking for a new distribution partner Inchcape Distributor Contract win Enabler for entry into new markets and broadening our brand exposure e.g. BMW Guam (2018), Daimler Latam (2019, 2020) & JLR Poland (2020) First half 2020 results – 30th July 2020 15
Capital allocation: maintaining our discipline 1 2 Invest in the business Dividends Capex for organic growth and To be resumed when appropriate technological investment Policy: 40% annual payout of basic EPS Retain focus on portfolio optimisation (pre exceptionals) Strong balance sheet 4 3 Net debt to EBITDA of max 1x (pre IFRS16) Share buybacks Value accretive M&A Suspended due to Covid-19 Required return targeted in years 2-4 Policy: distribute excess FCF (post-dividend and M&A) via buybacks First half 2020 results – 30th July 2020 16
Outlook: continued resilience Market outlook Strategic focus Markets remain dynamic Continue to outperform market volumes • • Underlying strength of recovery is unclear Becoming leaner and stronger • • Possibility of a second-wave Capitalising on opportunities • • 2020 outlook: Too early to provide a forward-looking view First half 2020 results – 30th July 2020 17
Duncan Tait Group CEO
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 supports our diversification Ignite strategy driving organic performance ahead of market growth Continued consolidation a material driver of value creation Sustainable business model well placed to benefit from future industry trends Well positioned to deliver shareholder value through organic growth, consolidation and cash returns First half 2020 results – 30th July 2020 19
Initial thoughts: Covid-19, the great accelerator Deliver the Drive Globalise Dial-up use of ‘Inchcape consolidation in processes data & digital Way’ distribution & smart centres Accelerate Drive insights, Help existing, Use shared development efficiencies and and new, services and by further growth partners grow automation to investing in our across a range improve people of markets profitability Continuing to help our OEM partners grow First half 2020 results – 30th July 2020 20
Q&A
Appendix
Supporting our communities Europe APAC Americas Provision of vehicles Public awareness campaign Vehicle support for the to Red Cross in early stages of outbreak Ministry of Health First half 2020 results – 30th July 2020 23
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