Preliminary Results 26 February 2008
Executing our strategy: The 6 th consecutive year of record results André Lacroix Group Chief Executive
Group financial highlights Sales * up 26% to £6.1bn • Like for like sales * up 3.4% • Operating profit ** up 27% to £270.7m • • Like for like operating profit** increase of 6.6% EPS *** up 3.6% to 37.0p • • Final dividend up 5.0% to 10.5p; full year dividend up 5.0% to 15.75p Consistent and strong delivery in 2007 * At constant currency ** Pre exceptional items, at constant currency *** Normalised 3
2007 Operational and strategic highlights Strategy delivery on track driving record profits for the Group • • Strengthen: like for like sales* +3.4%; like for like operating profit* +6.6% • Expansion: Sales* from new investments £1.2bn; operating profit* from new investments £47.9m Emerging Markets: continuing progress with acquisitions in Russia and the • Baltics, expansion in the Balkans and successful entry into China UK: successful integration of recent acquisitions contribute to UK profit of • £69.6m (+52%) International operations: sales of £3.4bn and trading profit growth of 16%. • Represents 76% of Group trading profit Group well placed to deliver further growth in 2008 and beyond 4 * At constant currency
Financial Results Barbara Richmond Group Finance Director
Summary P&L 2007 2006 Change £m £m % 6,057 4,842 25.1 Sales 265.0 213.9 23.9 Operating profit* 33.4 5.9 466 Net interest cost 235.1 213.9 9.9 Profit before tax 25.0 21.7 3.3ppt Tax rate (%) 37.0 35.7 3.6 EPS (p) ** 15.75 15.0 5.0 Dividend per share (p) 2.3 2.4 - Dividend cover (x) * Before exceptional items ** normalised 6
Sales Like for like Change % 2007 2006 Change constant change % constant £m £m % currency currency 1.4 0.4 2,509.5 2,518.5 (0.4) Distribution 52.6 6.8 3,547.3 2,323.6 52.7 Retail 26.0 3.4 6,056.8 4,842.1 25.1 Total 7
Trading profit & ROS 2007 2006 Change Change % Like for like constant change % £m £m % Trading profit currency constant currency Distribution 204.9 187.1 9.5 12.7 8.4 Retail 87.6 51.7 69.4 69.2 2.1 Total 292.5 238.8 22.5 24.9 7.0 ROS (%) 2007 2006 Change Like for like ppt change ppt Distribution 8.2 7.4 0.8 0.5 2.5 2.2 0.3 (0.1) Retail Total 4.8 4.9 (0.1) 0.1 8
Regional analysis – trading profit 2007 * 2006 * 8% 9% 15% 16% 19% 24% 10% 10% 5% 16% 10% 25% 16% 17% Hong Kong Australia Emerging Markets UK Europe** Singapore ROW * Before central costs 9 ** Excluding UK and Emerging Markets
Australia * Distribution Distribution Retail Retail • Another record year £m change % £m change % • Limited growth in Distribution sales due to model run outs Sales 408.1 2.1 236.0 8.8 • Increased Distribution Like for like 408.1 2.1 222.5 2.6 sales margin due to special editions and tight cost 34.3 21.7 8.6 (16.9) Trading profit controls Like for like 34.3 21.7 8.9 (14.0) profit • Retail profits lower in very competitive market 8.4 1.3ppt 3.7 (1.0) ppt ROS % • Good result from Autonexus * All regional figures are at constant currency 10
Hong Kong (VIR) • Market up 16.5% £m Change % • Government incentive increased hybrid sales Sales 264.3 17.6 • Strong sales recovery Like for like sales 213.4 18.9 • New models and store relocations Trading profit* 28.2 17.6 Like for like profit* 22.7 10.9 ROS %* 10.7 - 11 * Excluding property profit
Singapore (VIR) • New car market decline £m Change of 9.6% % • Lack of new models Sales 496.8 (24.7) • Competition from new models Like for like sales 496.0 (24.7) • Sales down 25% Trading profit 47.7 (18.6) • Market share decline Like for like profit 47.5 (18.5) of 6.3ppts to 18.2% • CV sales strong ROS % 9.6 0.7ppt • Good aftersales performance 12
Europe • Excellent performance Distribution Distribution Retail Retail across the region £m change % £m change % • Record results in Distribution Sales 824.1 5.9 379.8 (8.0) • Successful Retail Like for like sales 820.5 5.9 377.9 4.8 turnaround • Disposal of French retail Trading profit 49.3 20.0 0.8 144.4 centres Like for like profit 49.2 20.0 0.8 200.0 ROS % 6.0 0.7ppt 0.2 0.6ppt 13
UK • Retail LFL sales up 5.2% Distribution Distribution Retail Retail • Outperformed UK market £m change % £m change % • Focus on premium brands Sales 67.5 (31.0) 2,646.0 63.9 • Industry leading LFL ROS of 2.5% Like for like sales 36.4 (11.4) 1,509.9 5.2 • Used car margin pressure Trading profit 4.9 28.9 64.7 53.7 • Integration benefits of EMH and Lind Like for like profit 4.9 (14.0) 38.1 (6.3) • Disposal programme ROS % 7.3 3.4ppt 2.4 (0.2)ppt 14
Emerging Markets • Strong growth in Distribution Distribution Retail Retail all markets £m change % £m change % • Scale investment in the Baltics Sales 240.2 80.6 280.0 251.4 • Full year of Russia producing ROS of 6.6% Like for like sales 192.8 45.0 124.9 56.6 • China ahead of Trading profit 16.3 71.6 13.4 1,118.5 expectations Like for like profit 14.7 54.7 5.0 212.5 ROS % 6.8 (0.3)ppt 4.8 3.4ppt 15
Cash flow and net debt Operating cash flow £m Free cash flow £m Net cash £m Operating profit* 265.0 Operating cash flow 306.2 Free cash flow 184.7 Depreciation/ Net interest (37.1) Dividends (71.1) amortisation 33.7 Taxation (49.8) Share buyback (18.5) Working capital 14.6 Minority interest (1.8) Pension (13.2) Other (7.1) Capex (net) (32.8) Acquisitions (375.2) Disposals 85.5 Other 4.8 Net cash flow (203.0) Opening net debt (19.0) Translation on net debt** 0.5 Operating cash flow 306.2 Free cash flow 184.7 Closing net debt (221.5) * Excluding exceptional items ** Includes fair value re-measurements 16
2007 summary: Delivering our strategy Strengthen Expand • Existing facilities renewed and additional • Focus on operational excellence and funding obtained prior to credit crunch diversified value drivers delivers results • Successful entry into Russia and China • Record year for Europe Distribution and • Transformational acquisitions in the Australia Baltics • Margin protection in Singapore • Greenfield investment in Balkans • Turnaround in Europe Retail & Hong Kong • UK strategy outperforming the market Emerging Markets exposure Acceleration of like for like sales and profit growth doubled to 10% of Group profits 17
Executing our strategy: 2008 Priorities André Lacroix Group Chief Executive
Track record of profitable growth SALES HPBT 7 250 6 200 5 150 4 £BN £M 3 100 2 50 1 0 0 2001 2002 2003 2004 2005 2006 2007 2001 2002 2003 2004 2005 2006 2007 CAGR: 26.9% CAGR: 11.7% 19
Robust business model Multiple brand relationships Broad geographic spread Strongest premium brands Wgt avg. market growth 07: 4% Long-term and scale relationships Scale and high margin operations Right brands, right markets Big upside in Emerging Markets Wgt avg. GDP growth 08: 2.9% 26 countries Growth & Defensive value drivers Multi-Channels Diversified revenue streams Distribution : stable, strong cash Growth drivers : Vehicles, F&I generation funding expansion c.50% of Group trading profit Retail : continuing growth in mature Defensive drivers : Parts, Service markets; high growth opportunities c.50% of Group trading profit in Emerging Markets Well placed for revenue growth and margin protection 20
Delivering the strategy: 2008 priorities Strengthen Expand • Drive LFL vehicles growth ahead • Integrate acquisitions made in of the market to gain share 2007 and deliver synergies • Accelerate growth of highly • Footprint expansion in Russia profitable Aftersales • Footprint expansion in China • Drive margin improvement in growth markets and protect margin in challenging markets • Eastern Europe expansion • Address structural profitability • Identify additional core markets opportunities 21
Strengthen Delivering our strategy: 2008 Priorities Initiatives • New models and limited editions Drive LFL vehicles growth ahead of the market to gain share • Effective marketing to drive traffic • Continue to improve Customer experience • Improve conversion rate from footfall Accelerate growth of highly profitable Aftersales • Inchcape Advantage roll-out to improve service • Global Aftersales score card to improve capacity utilisation and productivity • Initiatives to increase service retention • Sales programmes to up-sell service • Increase the mix of profitable segments and models Drive margin improvement in growth markets and protect margin in challenging markets • Minimise the number of highly discounted deals [ie fleet] • Rigorous management of sales and marketing effectiveness and overheads Addressing restructuring opportunities • Disposal of French operation • Continue UK non-core disposals • Back office and process streamlining with SAP 22
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