Full Annual Report - Inchcape

Business review
Strategy
Operating review
Group
Our resilient global business model
and proven strategy has delivered
a solid financial performance in the
face of an unprecedented downturn.
John McConnell
Group Finance Director
Across Europe, we delivered resilient margin
in distribution despite the continued
downturn. In Greece, where the market
declined by 18.8%, our Toyota and Lexus
business retained its market leadership
position.Although the Belgian market fell by
12.6% we maintained our market share
under very competitive circumstances.
Although the market in Hong Kong
improved in the fourth quarter of 2009, it
was down 28.3% for the full year and we
remained market leader despite strong
pricing activity from our competitors. In
Singapore the market slowed down further
in the second half as new car quota sizes
were reduced by the government. However,
our strong marketing campaigns and lower
parallel imports led to a 3.7ppts gain in
market share to 21.4%.
In a year that saw the car market in
Australia decline by 7.4% we improved
our market share by 0.1ppts.
While our Russia and Emerging Markets
segment has been significantly affected
by the continued downturn, it remains
profitable and the Group gained market
share in the Baltics and the Balkans.
Retail business
The unprecedented downturn which
began in the second half of 2008 and
continued throughout 2009 has significantly
impacted the global demand for new
and used vehicles.We faced extremely
challenging trading conditions in all of our
markets across the world and although we
saw improvements in a few markets in the
second half of 2009, particularly the UK and
Australia, overall, total registrations in all of
our markets were considerably down
compared with 2008 for the full year.
Despite these significant market declines,
the Group has delivered resilient results
with sales of £5.6bn, a decline of 16.6% at
constant currency for the year. Our swift
response to market challenges,with a focus
on our five key operational priorities of
growing market share, growing aftersales,
reducing costs, managing working capital
and selective capital expenditure has been
reflected in a Group operating profit of
£175.2m before exceptional items, down
from £240.5m in 2008.
The restructuring carried out at the end of
2008 and in the second quarter of 2009 has
resulted in annualised like for like cost savings
of c.£70m.This has resulted in a trading
margin of 3.5%, down from 4.0% in 2008.
The Group has reduced working capital
by £176m in 2009 and our stock target
of 1.5 months was achieved earlier than
expected.This, together with our other self
help measures has enabled the Group to
deliver cash generated from operations
significantly ahead of expectations,
generating £336.7m, 83.3% better than
2008 (at actual rate).
The strong cash generation from operations
combined with the proceeds from the
Rights Issue enabled the Group to repay
a significant portion of its borrowings.The
Group ended the year with £0.8m of net
cash compared to a net debt of £407.8m
in 2008.
Distribution business
Our distribution businesses have been
resilient despite the global decline in car
markets resulting in sales of £2.4bn, a
decline of 19.7% and a robust 5.7% trading
margin, resulting in a trading profit of
£137.6m, a decline of 37.7% on 2008.
Although sales declined by 14.1% versus
2008, trading margins improved by 0.2ppts
delivering a trading margin of 1.8% as a
result of our self help measures put in place
at the start of the year to deliver a trading
profit of £56.4m.
In the UK we delivered solid results,
outperforming the market which fell by 6.4%,
to deliver a like for like sales decline of 3.9%.
With the beneficial impact of the
scrappage scheme and a significantly
reduced cost base, we generated a growth
in trading profit of 48.6% and 34.6% on a like
for like basis.
Our Australasian retail business delivered
a strong trading profit 15.2% higher than the
prior year and a trading margin of 3.9%,
an improvement of 0.6ppts.
Across Europe we have continued to focus
on delivering excellent customer service in
very challenging trading environments.
In our Russia and Emerging Markets
businesses, sales decreased by 1.6%.
Trading conditions remained extremely
challenging, however we finished the
year with a trading profit of £4.0m.
22
Inchcape plc ¦ Annual Report and Accounts 2009