Full Annual Report - Inchcape

Section
One
Business
review
The market
With the exception of Poland and China,
2009 saw significant declines in most of the
emerging markets. In Russia the market
declined by 49.5% on 2008.The Balkan
markets of Romania and Bulgaria declined
by 53%.The Baltics saw considerable
declines in the market for the full year, down
to 67%. Inchcape’s South American markets
fell by 10% in the premium sector and the
Ethiopian market also declined.The new car
market in China is one of the few globally
to have grown in 2009, and became the
largest car market in the world. Despite
these challenging market conditions
Inchcape retained or gained market share
in these markets.
Business model and strategy
We operate 20 retail businesses in
St Petersburg and Moscow.
In St Petersburg, we own and operate one
of the largest car retailing businesses in the
city with Toyota, Lexus,Audi and Peugeot.
In 2008, we acquired a 75.1% shareholding
in Musa Motors in Moscow, one of the
largest car retail groups in Russia, providing
the Group with scale presence in the
Moscow region representing eight brands.
We are the distributor for Toyota and Lexus in
Bulgaria and Romania. In Bulgaria we have
increased our presence in Sofia with the
opening of a new retail centre for Toyota in
2009. In addition, we are the distributor for
Toyota and Lexus in Macedonia and Albania.
In Poland, we retail BMW and MINI in
Warsaw and Wroclaw.
In the Baltics, we operate VIR for Mazda,
Jaguar and Land Rover.We are also the
retailer for BMW, Mitsubishi and Hyundai
in these markets.We have market leading
positions in Latvia and in Lithuania.
In China, we have scale Toyota and Lexus
retail centres in Shaoxing.A third scale retail
centre,for Lexus,opened in 2009 in Shanghai.
In Ethiopia we operate VIR for Toyota
through four sites.
In Chile we operate VIR for BMW and retail
for Honda. In Peru we operate VIR for BMW.
Our operating performance
The extremely challenging market
conditions led to a retail sales decline of
1.6% and a distribution sales decline of
45.9%.This resulted in a trading profit of
£4.0m in retail and a trading profit of £1.0m
in distribution. Included in the distribution
trading profit was a one off impairment
charge for land value in Romania of £4.2m.
In Russia we improved our competitive
position as we gained share and remained
profitable with a trading profit of £9.1m.
Our business in Poland continues to perform
ahead of our expectations.We capitalised
on our successful BMW business by opening
a new retail centre in the second half.
In the Balkans we experienced a significant
market decline and pressure on margin, as
all brand partners focused on liquidating
stock throughout the year.
In the Baltics, the extremely low level of
demand through the year and the need
to liquidate stock has also resulted in
margin pressure.
In the combined regions of the Baltics
and Balkans we enjoyed a stronger margin
performance in the second half as we
benefited from our cost restructuring and
the end of our destocking campaigns.
Our performance in China has been
encouraging following the recent opening
of our third showroom for Lexus in Shanghai.
In our business in Ethiopia a focus on
strengthening our core business through the
implementation of customer management,
growing aftersales and prudent cost control
has delivered another good performance.
The market driven declines in new vehicle
sales in our South American markets
were partially compensated for by an
improved sales performance on used
vehicles and aftersales.
Outlook for 2010
With the exception of China we expect
all of these markets to continue to face very
challenging trading conditions in 2010.
We will continue to improve our competitive
position through superior operating and
customer facing processes.
We will benefit from strong new product
launches from our brand partners and will
leverage these with effective marketing
campaigns.
We will continue to grow aftersales through
programmes to drive traffic, improved sales
skills and vehicle health checks.
We will continue our rigorous focus on
product margin, overhead management
and control of working capital.
Franchised retail centres
66
www.inchcape.com 35