Inchcape: Industry leader in a fragmented market André Lacroix Group CEO
Inchcape Overview Unique business model positions Inchcape as global industry • leader Leading independent automotive distributor and retailer with scale operations in • 26 markets Superior operating and customer-facing processes • Long standing relationships with the strongest motor manufacturers • Four value drivers - growth (Vehicle sales, F&I) and defensive (Parts, Servicing) • Highly respected management team • Industry leading margins and track record of profitable growth and • shareholder value creation Resilient financial performance demonstrating strength of business • model in a downturn Strongly positioned for the upturn • Industry leader in a fragmented market
Automotive Value Chain Manufacturer Distributor Retailer Customer OEMs Inchcape Distribution, Retail and VIR operations
The Distribution process: OEMs use independent distributors and importers in small / medium sized countries OEM Distribution in Belgium, Greece, Australia, Production, shipping and landing of vehicles New Zealand, Balkans, Finland, Baltics, by the OEM Chile, Peru Inchcape role: Distribution New cars & parts: From ordering, logistics to delivery Warranty: From claim to reimbursement Operational Role: Management of Dealer network, national marketing responsibility Dealer together with promotions, public relations Dealer Dealer Dealer Network and pricing, customer database management and back office functions Customer Inchcape owned
The Retail process: OEMs use their own national sales company to distribute and appoint independent dealers OEM – National Sales Company Scale operations with the best performing OEMs concentrated on regional basis Dealer Dealer Dealer Dealer where Inchcape retails only Network Inchcape role: New cars: Sale and delivery to customer Used cars: Part exchange refurbish and resale New vehicles Used vehicles Aftersales Service & Body Shop: Service and repair Parts: Sale to motorists and independent dealers Finance & Used Parts Service / Finance & Accessories Insurance warranty Bodyshop Insurance sales Operational: Local marketing, promotions and back office functions Customer Inchcape owned
The VIR process: 100% owned Distribution / Retail operations in City State markets OEM VIR in Hong Kong, Macau, Guam, Saipan, Singapore, Brunei, Baltics, Ethiopia Inchcape role: Distribution New cars and parts: From ordering, logistics to delivery to sale to customer VIR Used cars: Part exchange refurbish and resale Service & Body Shop: Service and repair Warranty: From claim to reimbursement Retailing Operational Role: National marketing responsibility together with promotions, public relations, customer database management and back office functions New Service/ Parts F&I cars Bodyshop sales Inchcape owned
Our business model economics Mature markets Emerging markets TOTAL** H1 2008* VIR Distribution Retail Distribution Retail Sales £m 439.3 736.6 1,702.5 214.4 205.1 3,297.9 % of Group sales 13.3% 22.3% 51.6% 6.5% 6.2% Operating profit £m 50.2 44.7 37.7 18.7 7.7 151.1 % of Group profit 31.6% 28.1% 23.7% 11.8% 4.9% RoS 11.4% 6.1% 2.2% 8.8% 3.8% 4.6% * Prior to the downturn ** Includes central costs
Inchcape: Our Strategy
Inchcape Vision and Strategy To be the world’s most customer centric automotive retail group STRENGTHEN EXPAND Customer-focused Consolidation in operational excellence high margin / high growth in every site areas Operating in 26 markets Market leader in 15 markets Partnered with the world’s strongest automotive brands Proven and resilient business model
Our Customer 1 st strategy is proving a strong differentiator in a fragmented industry STRENGTHEN EXPAND Customer-focused Consolidation in operational excellence high margin / high growth in every site areas INCHCAPE ADVANTAGE
What is Inchcape Advantage? Group-wide strategic programme to put the customer at the • heart of everything we do Clear objective to ‘systemise’ the way we deliver an outstanding • customer experience every day, every time, everywhere – at every stage of the customer journey based on deep customer understanding A customer-focused ‘retail’ organisation rather than a traditional • ‘deal’-driven dealership group Leveraging the benefits of the Group to quickly share innovation • Inchcape Advantage is our competitive advantage as we bring world class retail skills into a fragmented industry
Inchcape Advantage portal: Rigorous performance management Purchase Phase Ownership Phase Quantity Measures Traffic Enquiries Leads Bookings Test Drives Lead Times Capture Rate % Capture Rate % Quality Net Promoter Score Net Promoter Score Measures & Mystery Shop & Mystery Shop Rigorous real time measurement - site by site Globally accessible systems to identify areas for focus & recognise progress
Our Customer 1 st strategy is proving a strong differentiator in a fragmented industry STRENGTHEN EXPAND Customer-focused Consolidation in operational excellence high margin / high growth in every site areas EMERGING MARKETS
Developed vs. Emerging market growth Car parc per 1,000 population 60,000 Finland 50,000 Belgium Australia USA Germany GDP per capita (USD) UK 40,000 Singapore Greece Hong Kong 30,000 20,000 Estonia Russia Poland Latvia Lithuania 10,000 Chile Romania China Bulgaria Peru India 0 0 100 200 300 400 500 600 Car parc per 1,000 population Source: Global Insight Industry Forecast Reports, International Monetary Fund Note: Data based on 2008 figures
Group position scaled up in the high growth, high margin Emerging Markets The Group now enjoys scale representation in the Baltics, Balkans, • Russia, Ethiopia and South America New Retail footprint with large scale facilities delivering superior • returns Benefiting from fewer but bigger and better retail facilities • Sites Revenue % of Group profit* 17.8 56 60 1,200 16.6 18 1,056.7 £m £m 16 50 1,000 14 39 40 800 12 606.8 10 30 600 8 5.7 17 20 400 6 12 3.7 201.2 4 134.6 10 200 2 0 0 0 2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008 Note: On statutory basis. 2007 and 2008 Emerging markets are disclosed per the new IFRS segmentation * Pre exceptional items
Historically strong performance of revenue and Appendix III - Financial Information profit growth in an expanding market Return on sales Revenue Operating profit* 4.4 4.5 7,000 300 4.5 6,057 270 3.9 3.7 4.0 3.6 CAGR 10.5% 6,000 250 CAGR 20.8% 214 4,842 3.5 2.9 3,855 4,170 4,488 5,000 176 2.6 200 3.0 £m 155 3,320 3,517 £m 4,000 140 % 2.5 150 2.0 3,000 102 87 100 1.5 2,000 1.0 50 1,000 0.5 0 0.0 0 2001 2002 2003 2004 2005 2006 2007 2001 2002 2003 2004 2005 2006 2007 2001 2002 2003 2004 2005 2006 2007 * Pre exceptional items RoCE** EPS*** Operating cash flow 293 300 33.4 6.41 7 34 CAGR 7.6% 6.32 32.9 237 33 32.0 6 250 31.6 32 4.63 4.55 195 189 5 4.17 187 200 31 164 152 4 £m 30 % 150 p 2.81 28.3 29 3 27.9 100 28 2 27 50 1 26 0 0 25 2001 2002 2003 2004 2005 2006 2007 2002 2003 2004 2005 2006 2007 2002 2003 2004 2005 2006 2007 ** ROCE (Return on capital employed) defined as *** Adjusted for the 2006 share split and 2009 Rights Issue operating profit pre exceptional items/net assets Six years of record growth
Inchcape: Management of an unprecedented industry downturn
Rapid and unprecedented sales deterioration in a number of Inchcape’s core markets Core market year-on-year sales volume changes UK Australia Singapore Hong Kong - - - 50% 40% Q108 Q208 Q308 Q408 Q109 Q209 (2)% Q108 Q208 Q308 Q408 Q109 Q209 Q108 Q208 Q308 Q408 Q109 Q209 (5)% (5)% • Unprecedented speed 30% (4)% 20% (10)% (10)% (6)% of decline in new 10% (8)% (15)% (15)% - vehicle markets (10)% (10)% Q108 Q208 Q308 Q408 Q109 Q209 (20)% (20)% (12)% started in Q3 08 (20)% (14)% (25)% (25)% (30)% (16)% (40)% (30)% (30)% • All markets quickly (18)% (50)% (35)% (20)% (35)% (60)% impacted by the downturn Belgium Greece Russia • Driven primarily by 15% - 60% • Falling consumer Q108 Q208 Q308 Q408 Q109 Q209 10% (5)% 40% confidence 5% (10)% 20% - (15)% • Abrupt lack of Q108 Q208 Q308 Q408 Q109 Q209 (5)% (20)% - consumer credit Q108 Q208 Q308 Q408 Q109 Q209 (10)% (25)% (20)% (15)% (30)% (40)% (20)% (35)% (25)% (40)% (60)% Sources: UK = SMMT, Australia = Vfacts, Singapore = OneMotoring (* LTA data shown, includes parallel imports), Hong Kong = Local Government, Greece / Belgium = ACEA, ,Russia = Association of European Business (Russian foreign brand vehicle sales) – figures are for new light vehicle sales, year-on-year change
Swift management response to mitigate the effects of the downturn Oct 2008 Nov 2008 Apr 2009 Group-wide Changed • • Successful Rights • streamlining of management Issue to re- management focus bonus metrics from establish balance on our Top 5 EP to operating sheet strength with cash flow support of our • Major cost shareholders restructuring Final 2008 dividend • programme started cancelled to protect 2009 cash flow Weekly • performance management system to reduce stock / inventory
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