Full Annual Report - Inchcape

Section
One
Business
review
level generated by the Group since 2000
and represents a 215% conversion of
operating profit.
Debt reduction
The Group has historically maintained an
appropriate level of borrowings based on
a prudent balance sheet strategy. Given
the precipitous decline in economic
conditions seen at the end of 2008 and
the challenging trading environment
forecast for 2009, the Board announced
an equity raise via a Rights Issue in March
2009 which was completed in April 2009.
This enabled us to reduce our debt and
strengthen the capital structure of the
Group.I would like to thank our shareholders
for their support.
The net proceeds of £234.3m raised by this
Rights Issue together with the actions we
took to restructure our cost base and
reduce working capital, together with the
benefits of our geographic spread and
diversified revenue streams, enabled us to
be in a net cash position at year end.
Acquisition and disposals
During 2009 we made an earn out payment
of US$35m and a further US$5m will be paid
in 2010 in relation to the acquisition of the
75.1% interest in the Musa Motors group,one
of Russia’s largest car retailers.Whilst the
Russian car market has been challenging
in 2009 and we expect this environment to
continue in 2010, we are confident that due
to our scale position and the low levels of
car ownership, our investment in Russia has
placed us in a strong position to benefit
when the market rebounds.
Capital expenditure
Whilst in 2009 we reduced our discretionary
capital expenditure in agreement with
our brand partners, we have continued to
make strategic investments, opening nine
greenfield sites across the world.
Board
After 15 years with the Group, Peter Johnson
retired as Non-Executive Chairman and I
was delighted to be appointed to the role
with effect from 14 May 2009. I would like
to thank Peter for his years of service and I
feel privileged to be working with so many
talented colleagues both on the Board
and throughout the business.
There have been a number of other
changes to the Board. On 14 May 2009
Graham Pimlott was appointed as
Chairman of the Audit Committee, with
Raymond Ch’ien and Karen Guerra both
retiring as Non-Executive Directors.
Following three years with the Group and
the successful completion of the Rights
Issue, Barbara Richmond, Group Finance
Director, left the Group at the end of June.
John McConnell was appointed to the
position with effect from 1 October 2009
and joined the Board as an Executive
Director. John was formerly CEO Inchcape
Australasia, before that CFO and has 10
years’ experience with the Group.
Also, we were pleased to announce the
appointment of two new Non-Executive
Directors with effect from 1 July 2009:Alison
Cooper, who is currently Chief Operating
Officer, Chief Executive Designate and
board member of Imperial Tobacco Group
plc, joined the Board and has also become
a member of the Audit Committee; Nigel
Northridge, currently Chairman of Paddy
Power plc, Senior Independent Director
of Aggreko plc and Chairman of
Debenhams plc, joined the Board and
has also become a member of the
Remuneration and Audit Committees.
Dividend
In line with our disclosure in last year’s Annual
Report and Accounts and in the Prospectus
published at the time of the Rights Issue, the
Board is not recommending the payment of
an ordinary dividend for the year in light of
the challenging trading conditions.
Whilst no decision has been made as yet
concerning a dividend in 2010, we intend
to return to our stated aim of maintaining
a progressive dividend policy as soon as
trading conditions allow.
Share consolidation
The Board intends to propose a 1 for 10
consolidation of Inchcape plc ordinary
shares.The purpose of the share
consolidation is to reduce the total number
of shares now in issue following the Rights
Issue undertaken in 2009 and to increase
the likely price of the Company’s shares to a
figure more appropriate for a listed company
of its size and nature in the UK market.The
share consolidation is subject to approval
by shareholders at the Annual General
Meeting to be held on 13 May 2010.
Following the share consolidation there is
expected to be approximately 460m
Inchcape ordinary shares in issue, reduced
from approximately 4.6bn at present.
Approach to governance
and corporate responsibility
We continue to focus on the importance of
good governance and apply the Combined
Code and other relevant guidance for
listed companies in our global operations.
Integrating socially responsible behaviour
into every aspect of how we operate and
define ourselves remains high on our
agenda. In 2009 we have built on the
foundations of a global approach to
corporate responsibility that is making
responsible economic, environmental and
social behaviour intrinsic to the way we work.
People
On behalf of the Board, I wish to express my
sincere thanks to all our colleagues across
the Group for their commitment and
support throughout the extremely
challenging trading conditions in 2009.
Outlook
Inchcape is uniquely positioned in the global
car industry and in 2009 the Group has
continued to outperform its competitors.
Whilst we expect market conditions in 2010 to
remain challenging,the Group is well placed
to benefit from the market recovery and to
take advantage of industry consolidation
opportunities in the medium term.
Ken Hanna
Chairman
www.inchcape.com 7