Full Annual Report - Inchcape

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Business review Strategy Operating review continued United Kingdom Brand partners Connor McCormack Chief Executive Officer Inchcape UK In the UK,we have a significant retail business with 128 franchised retail centres and a focus on core premium and premium-volume brand partners. Financial highlights Sales Year ended Year ended % change 31.12.2009 31.12.2008 in constant £m £m % change currency Retail 2,055.7 2,319.4 (11.4)% (11.4)% Distribution 30.0 20.7 44.9% 44.9% Like for like sales Retail 1,938.0 2,017.6 (3.9)% (3.9)% Distribution 30.0 20.7 44.9% 44.9% Trading profit/(loss) Retail 42.8 28.8 48.6% 48.6% Distribution 3.9 (5.7) 168.4% 168.4% Like for like trading profit/(loss) Retail 42.8 31.8 34.6% 34.6% Distribution 3.9 (5.7) 168.4% 168.4% Trading margin Retail 2.1% 1.2% 0.9ppt 0.9ppt Distribution 13.0% (27.5)% 40.5ppt 40.5ppt Cash generated from operations Retail 44.9 116.5 (61.5)% Distribution 10.2 (2.6) 492.3% Key financial highlights Contribution to Group sales Contribution to Group profit 37.4% 24.1% Sales £2,085.7m 10.9% 2008: £2,340.1m Trading profit £46.7m 102.2% 2008: £23.1m Operational highlights for the year • Inchcape outperformed the market, gaining share through strong customer funnel management • Effective capitalisation on the government scrappage scheme • Successfully leveraged demand in the used car market • Aftersales proved resilient More online at www.inchcape.com/ourbusinessmodel/regions 32 Inchcape plc ¦ Annual Report and Accounts 2009
Section One Business review The market The government scrappage incentive, announced in early 2009 (and extended into early 2010) has had a significant impact on the 2009 market resulting in a full year decline of 6.4%, significantly better than early expectations.Since its introduction, the scrappage scheme has accounted for over a fifth of all new car registrations; excluding the scrappage registrations the market declined 19.6%.The demand for private vehicles was better than expected, up 13.7% buoyed by scrappage and consumers taking advantage of reduced VAT rates before 31 December 2009. Business model and strategy We have scale operations in the core regions of the South East, Midlands, North and North East of England with a streamlined portfolio which focuses on premium and premium-volume brands. We aim to create significant differentiation by delivering an outstanding level of customer service through our Inchcape Advantage programme and to drive growth in aftersales and car finance penetration. Our fleet leasing business, Inchcape Fleet Solutions (IFS), offers fleet management and leasing services to corporate and government customers.With over 50 years’ experience in the automotive industry, IFS has a combined fleet size of approximately 41,000 vehicles.This makes up the distribution element of our UK results. Our operating performance We continue to outperform our competitors. In a market which declined by 6.4%, our retail business delivered a decline in like for like sales of 3.9%. Margins in the used car market were strong on the back of a general shortage of quality part exchange vehicles. The solid performance in our used and new car business together with cost savings generated by our restructuring have resulted in a strong trading profit of £42.8m which was 48.6% higher than 2008, and trading margin of 2.1%, 0.9ppts better than 2008. IFS delivered a solid trading profit of £3.9m following a loss of £5.7m in 2008 in part due to recovery in used car prices. Cash generated from operations was £55.1m. Franchised retail centres 128 Outlook for 2010 2010 will be another challenging year for the UK car market and our expectation is for an overall decline versus 2009. The market has had a significant boost in 2009 from the scrappage scheme which is expected to end in March 2010 and from ‘pull forward’ of orders into the last quarter of 2009 ahead of the VAT rise on 1 January 2010. Our priority for 2010 is to continue to grow market share through superior Customer 1st processes and capitalising on strong new product launches from our brand partners. We will further develop our achievements in aftersales through prospecting, conversion and retention programmes. We will maintain our significant achievements in working capital reduction through stock control. www.inchcape.com 33
Page 1 and 2: Annual Report and Accounts 2009 Ind
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Section Four Shareholder informatio
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