Full Annual Report - Inchcape

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