142
Inchcape Investor Day9 October 2006
André LacroixGroup Chief Executive
The day ahead
2.30pm André Lacroix Group Chief ExecutivePart One - Where are we now?Distribution OverviewRetail OverviewPart Two – The way forward
3.15pm Barbara Richmond Group Finance Director3.40pm Q&A3.55pm Coffee Break4.15pm Spencer Lock Managing Director, UK Retail
John McConnell Chief Executive, Australia & New ZealandDale Butcher Group Development Director
5.00pm Q&A & Conclusion
Drinks reception
Investment case
• A unique business model with consistent financial track record
• Margin enhancement through continuous business improvement
• Diversity of earnings• Long standing relationships with high growth brand
partners• Growth opportunities in both developed and
developing markets• Strong cash flows to fund future acquisitions and
investments
The leading international automotive distributor and retailer
Historical five-year performance
2001 2002 2003 2004 2005 2001 2002 2003 2004 2005
Revenue (£bn) Operating Profit** (£m)
* UK GAAP ** Before exceptional items
CAGR: 19.1%
CAGR: 9.6%
*
3.13.4
3.84.1
4.5
88109
134
172189
part one
Where are we now?
Unique business model
Distribution Retail
Developedcountries
Developingcountries Bases for future growth established
Historical core of Inchcape
Investment focusin last 5 years
H1 2006 segmental results
Retail Distribution
Volumes (‘000) 39 94
Sales (£m) 1,135 1,305
Trading margin (%) 2.5 7.0
Trading cash flow (£m) 51.2 142.4
ROIC (%)* 16.5 118.1
Number of sites 230 83
* Pre Lind acquisition
Diversity of earnings
10%
64%
17%
3%
6%
Australia Belgium Greece UK Other
Retail – sales Distribution - sales
17%
18%
12%8%
27%
4%
14%
Australia Belgium GreeceHong Kong Singapore UKOther
Long-standing relationships
UK41 years
Hong Kong40 years
Singapore39 years
Belgium25 years
Greece20 years
Australia14 years
Hong Kong30 years
Baltics13 years
UK18 years
Australia14 years
UK20 years
UK17 years
Chile12 years
Peru8 years
Strong relationships with high growth brands
Car industry global five year* volume growth
(CAGR%)
Inchcape core partners**
five year volume growth (CAGR%)
* 2000-2006 ** Toyota/Lexus, Subaru, VW, Mercedes, BMW
3.3%
4.2%
Industry consolidates towards bigger, better retail operations managed by well financed and professional operators
LFL sales and profit growth
• Outstanding customer experience
• Vehicles new and used
• Finance and insurance
• Parts and services
• Operational excellence
Developedcountries
Developingcountries
Niche, emerging and mainstream brand opportunities
Industry growth and Retail network development
A very sound business model that provides major growth opportunities
Distribution RetailDistribution Retail
Organic Expansion
CEOAndre Lacroix
CFOBarbara Richmond
StrategyImmo Rupf
Business Dev’tDale Butcher
Human ResourcesNick Smith
Company SecretaryRoy Williams
15 years serviceSales & marketingPrimarily automotive career
8 years serviceFinance & operations managementFMCG & automotive career
20 years serviceFinance & general managementAutomotive career
7 years serviceOperations managementInsurance & automotive career
6 months serviceMulti-site auto retail management
1 year serviceGlobal general managementFMCG & retail career
6 months serviceFinance
Chemicals & manufacturing
6 months serviceStrategy & change
managementConsulting & finance career
20 years serviceStrategy & business
developmentFMCG & automotive
4 years serviceFinance & Human Resources
Retail, telecoms & automotive
29 years serviceGroup Company
Secretary & LegalCorporate, commercial
& automotive
Asia PacificWilliam Tsui
AustraliaJohn McConnell
Europe Distribution
Martin Taylor
UK RetailSpencer Lock
Europe Retail George Ashford
Strong and experienced leadership team
Distribution overview
Inchcape distribution advantages
• Deep involvement in brand development and product innovation
• Geographic spread: developed and developing countries
• Benefits from Vertical Retail Integration
• Limited capital investment: highly cash generative
• All distribution markets our strategy to operate direct retail – up to 30% market share in large markets– Can be higher in small markets
• Provides valuable retail customer and dealer expertise to grow markets– Total system economics understanding: Distribution + Retail– Model policy and limited series launches– Pricing and positioning– Used cars, residual values, Finance &Insurance
• Delivers high margins– Double margin: distribution + retail– Increased cost effectiveness– Integrated supply chain and inventory management
Vertical retail integration benefits
Distribution unit economics
Australia Belgium Greece Hong Kong Singapore
Units (‘000) 36 28 25 12 38
Revenue (£m) 405 364 252 242 720
Operational margins (%) 6.6 3.6 6.6 11.7 8.7
Capital employed (£m)Fixed assets 8 4 8 17 14Working capital (59) 25 (53) 18 42
ROIC (%) n/a 46 n/a 81 89
Capex (£m) 2 1 1 1 2
Source: 2005 FY Performance
Growth opportunities in distribution
Distribution
• Market share
• Aftersales
Retail
Niche, emerging and mainstream brand opportunities
Distribution Retail
DevelopedcountriesUK, EuropeAustralia
Hong Kong, Singapore
DevelopingCountries
Eastern EuropeLatin America
• Market growth
• Market share
• Aftersales
Organic Expansion
Retail overview
Inchcape retail advantages
• Long standing scale operations in chosen countries– Investment in core regional markets
– Scale with selected brand partners
• Dedicated brand management
• Diversified revenue streams: new, used, finance, aftersales
• Attractive unit economics
• Major growth opportunities in developed and developing markets
Regional scale in retail
Number of core % of country retailregional markets revenues they
represent
UK 4 80
Australia 3 100
Western Europe 6 95
Eastern Europe 5 90
* Pre Lind acquisition
With focus on core regional markets for operational synergies
Australia: three core regions
Melbourne
MELBOURNE• Subaru (4)• Total of 4,900 units (2005)
BRISBANE• Subaru (2), Hyundai (2), Kia (2), Mitsubishi (1)
• Total of 1,900 units (2005)Queensland
New South Wales
Victoria
Brisbane
Sydney
Northern Territory
South Australia
WesternAustralia
SYDNEY• Subaru (3), VW (2), Hyundai, Kia• Total of 4,400 units (2005)
UK: four core regions
WEST MIDLANDS• VW cluster• 5,061 units (2005)
LIVERPOOL• Mercedes cluster• 3,801 units (2005)
MIDLANDS• Mercedes, Toyota• 20,674 units (2005)
GREATER LONDON/SOUTH EAST• BMW + Mini, Toyota• VW, Audi, Vauxhall, PAG, Ferrari• 33,101 units (2006E)
West midlands
North
South
Midlands
Diversified revenue streams
Vehicles Aftersales
New Parts
Used Services & Light Repair
Finance & Insurance Body & Paint
Full retail and service value chain in the local market
Retail unit economics
Typical sites
Continental UK Australia DevelopingEurope markets
Units - New 300 470 380 1,700- Used 80 470 160 350
Revenue (£m) 5 21 16 30
Operating margin (%) 1.5 3.0 2.4 5.0
Capital employed (£m) 1 5 4 6
Fixed assets 1 2 2 4
Working capital 0 3 2 2
ROIC % 8 12 12 20
Growth opportunities in retail
Distribution
• New cars
• Used cars
• Aftersales
• Finance
Retail Distribution Retail
DevelopedcountriesUK, EuropeAustralia
Hong Kong, Singapore
DevelopingCountries
Eastern EuropeRussiaChina
• Market growth
• New cars
• Used cars
• Aftersales
• Finance
Organic Expansion
• Drive industry consolidation
• Higher system share
• Higher system share
• New market entries with scale
part two
The way forward
Inchcape strategy
Two strategic Two strategic priorities:priorities:
One vision:One vision:
Strengthen
Existing core businesses
Strengthen
Existing core businesses
To be the world’s most customer centric automotive retail groupTo be the world’s most customer centric automotive retail group
Expand
In existing, emerging and new markets
Expand
In existing, emerging and new markets
Recognise that it is our people who make the differenceRecognise that it is our people who make the differenceFour enablers:Four enablers:
Gold Standard performance management Gold Standard performance management
Use technology to free up timeUse technology to free up time
Disciplined allocation of capitalDisciplined allocation of capital
Value drivers
Strengthen: increase profitability of outlets
Customer centricityto drive like-for-like
sales growth
Customer centricityto drive like-for-like
sales growth
Operational excellenceto drive like-for-like
profit growth
Operational excellenceto drive like-for-like
profit growth
StrengthenStrengthen
Inchcape advantage
Outstanding customer service
• Generates higher customer conversion and loyalty rates
• Satisfies the emotional needs of customers: Creates a retail experience brand that is unique in the motor industry
• Makes Inchcape the best OEM-partner with global scale and local excellence
• Continued access to attractive development opportunities
Inchcape advantage
• In May we started systematic collection of customer service excellence best practices
• Bank of over 100 best practices with proven bottom line impact
• Global rollout will start in 2007 and take 18-24 months to implement
Relentless push to drive like-for-like sales growth
The customer opportunity is huge
• Retail Brand Experience is an important source of Brand differentiation as product quality improves
• Inconsistent Service level in the industry
• Opportunity to improve customer retention beyond warranty
We will drive like-for-like profit growth through key value drivers (1)
Vehicles Parts
Quality of revenues
• Innovation and special editions• Market share increase
• Service loyalty• Trade vs retail sales
Flow through• Marketing effectiveness• Overhead cost management
•Effective pricing• Sales/Employee
Working capital • Vehicle stock• Over age debtors
• Stock level• Stock age
Network quality
• Market mapping and network strategy
• Retail sites: Locations, scale, representation
• Dealers operating standards
• Repair sites: location, scale, representation
• Operating standards
Distribution
We will drive like-for-like profit growth through key value drivers (2)
RetailVehicles Service Parts
Quality of revenues
• LFL volume growth
• Model mix management
• Used car
• Capacity utilization
• Service mix
• Service loyalty• Trade vs. retail sales
Flow through • Revenue/car• Finance/car
• Service efficiency• Service hours/ technician
• Effective pricing• Sales/employee
Working capital• Vehicle stock level and age
• Over age debtors
• Over-age debtors • Stock level• Stock turns
• Retail expansion in existing markets– Developing
– Developed
• Create four additional scale retail markets
• Identify new distribution opportunities– Existing partners
– New partners
Expand:plan to invest significantly withour brand partners in 3 growth areas
Financial capacity to invest up to £800m
United Kingdom Drive retail consolidationsAustralia
Hong Kong Grow premium segment Singapore share and aftermarket
Greece Increase owned retail shareBelgium and develop multi-brand Balkans retail representation
Baltics Acquire scale retail Poland businesses and develop
Latin America greenfield operations
Increase retail scale throughacquisition andgreenfield inexistingmarkets
Create four additional profitable scale retail markets with at least 25-30k units
Existing core markets
Russia
China
……
……
4
6
1
1
?
?
Russia
The opportunity Inchcape entry strategy
• Import market experiencing strong growth
• Sales for 2006 forecast to be 50% above 2005
• Market concentration:
• Moscow (50%)
• St Petersburg (12%)
RAPIDLY DEVELOPING A PRESENCE• JV with Independence for two Toyota sites in
Moscow. Completed
• Acquisition of 75.1% of Axel St Petersburg (Toyota/Lexus). Completed
• Further scale retail acquisitions
• Regional and new franchises roll out
China entry strategy
The opportunity Inchcape entry strategy
• Market growth continues
• Sales up by 25% in 2005 to 3.1m units. 1Q 2006 up 68%
• Market concentration:
• Beijing (20%)
• Shanghai (13%)
• Guangzhou (14%)
• Scale (30,000 units) likely to require presence in all three major cities
Step 1
• Opening of 2 operations in Greater Shanghai:
• Toyota and Lexus in Shaoxing (H1/2007)
• Lexus Shanghai (H2/2007)
Step 2• We are currently evaluating several scale
acquisitions / partnership options and greenfield operations
West EuropeFrance
GermanySpain
United States
South Africa
Eastern EuropeRomania
Poland
India
Turkey
Process and shortlist of additional markets
Systematic Assessment (in 2007)- Market growth potential
- Attractive brand partners
- Retail economics
- Availability of scale entry opportunity
- Inchcape assets and capabilities to leverage
DEVELOPED
DEVELOPING
Develop new distribution opportunities
Distribution Retail
Developedcountries
Developingcountries
Niche, emerging and mainstream brand opportunities
Develop scale with partners
Existing New
• Toyota, Lexus
• Subaru
• VW
• Mazda
• Mercedes
• BMW
• Audi
• Honda
Our global organisation model
Decentralised Coordinated
• Empowerment
• Resources in markets
• Fast decisions
• More time with customers
• Best practice benefits
• Consistent standards and systems to improve productivity
• International careers
• Strategic guidance from the centre and support from the Executive Committee
and
Economic profit
We are changing the ways we set goals
Average10%
GoldStandard
%
Bad7%
OK13%
Bad8%
OK12%
EP
Average 10%
Operation1
Operation2
Operation3
Operation4
Operation5
Economic profit = PAT – WACC
The Gold StandardThe Gold Standard
Conclusion
We have a clear roadmap for the next stage of growth
Sources of targeted profit growthGrowth from expansionLike-for-like profit growth
2005
Developedmarket
Developingmarket
Developedmarket
Developingmarket
2011
We have a clear roadmap for the next stage of growth
Multiple growth opportunities
Five year outlook
Developedcountries
Developingcountries
Distribution Retail
+++
+++
+
++
• Healthy balance between organic like-for-like growth and expansion opportunities
• Attractive returns• Up to £800m invest in expansion
• Strong cash generation from existing portfolio
• Every market contributing to profit growth
• Successful integration of acquisitions
Our formula for delivering shareholder return
• Deep understanding of the sector
• Unique relevant business model
• Highly international geographical footprint, spanning developed and developing countries
• Leadership positions in key markets, with best-in class margins
• Enduring relationships with “winning”OEM brand partners
• Strong and professional management team
Business platform
Future growth
Business Performance
• Many opportunities to pursue – organic, acquisitions
• Clear focus
• Financial flexibility
The leading international automotive distributor and retailer
Barbara RichmondGroup Finance Director
Inchcape strategy
Two strategic Two strategic priorities:priorities:
One vision:One vision:
Strengthen
Existing core businesses
Strengthen
Existing core businesses
To be the world’s most customer centric automotive retail groupTo be the world’s most customer centric automotive retail group
Expand
In existing, emerging and new markets
Expand
In existing, emerging and new markets
Recognise that it is our people who make the differenceRecognise that it is our people who make the differenceFour enablers:Four enablers:
Gold Standard performance management Gold Standard performance management
Use technology to free up timeUse technology to free up time
Disciplined allocation of capitalDisciplined allocation of capital
• Complete new internal reporting system• New performance metrics appropriate for individual
segments and sites• Drive gold Standard operating performance by value
driver at site level including use of assets• Ultimate focus on economic profit (see appendix)
Gold Standard performance management
• Management accounts for each of our 313 operating businesses
• Profitability, productivity, asset utilisation and return information for each department
• Key change in business analysis• Drill down/traffic lights
Reporting system
• Shift from Distribution to Retail• Distribution
- market share- return on sales
• Retail- like-for-like- margin- flow through- productivity- capital intensity
Performance metrics
• Target setting• Stretch versus incremental• Multi-site comparison• Best in class• Profit and loss, balance sheet, cash flow,
productivity and market share
Gold standards
Group
• Recurring profit after tax less cost of equity
• Target for rate of growth and absolute EP over strategic plan period
• More appropriate measure than ROCE
Business Unit
• Recurring after tax operating profit less notional/actual rent less cost of capital employed
• Targets set down to department level by business
Economic profit
• Economic profit is the target
• Gold standards are the tools
• Management accounts monitor actual and rate of progress
• Site by site variances are significant
Gold standard performance
Use technology to free up time
• Automation of processes and information
• Free up people to focus on front office activities
• Transfer of best practice processes around the group
• Consistent information for decision making
Disciplined allocation of capital
• Investment criteria
• Funding capacity
• Evolution of the business model
• Distributions to shareholders
Investment criteria
• Opportunities must meet strategic criteria
• Primary focus on internal rate of return
• Secondly economic profit generated over the investment period
• Cash payback also important
• Differential hurdles for Developing and Developed markets
• Continued strong cash generation from existing businesses
• Strong balance sheet
• Significant borrowing capacity
Good capability to finance expansion opportunity
Strong cash generation from operations
0
20
40
60
80
100
120
140
160
180
2002 2003 2004 2005
Retail Distribution
154.8
12.2
157.7 156.6142.4
16.6 16.9
51.2
£m
Proforma balance sheet*
£m
Fixed assetsProperty 294
Other 112Goodwill 125
Total 531
Working capital 38
Cash 79
Other net liabilities (10)
Total net assets 638
Property comprises 46% of asset base and 13% of market capitalisation
* Post Lind acquisition
30th June 2006
Property strategy
• Continue to acquire freehold property due to strategic commercial value
• Use as part of overall funding security• Securitisation remains a future option
Funding capacity
• Ongoing cash generation
• Strong balance sheet
• Investment grade status
Financial capacity to invest up to £800m
Distributions to shareholders
• Progressive dividend policy
• Ongoing dividend cover around 2.5 times recurring earnings
• Priority to capital investment over buy backs if sufficient value generating opportunities
Sustainable financial performance
• Increasing proportion of retail versus distribution profits
• Increasing proportion of retail profits from developing markets
• Mix change to smaller vehicles
• Gold Standard performance
• Focus on higher margin value drivers
Margin Impact
Spencer LockManaging DirectorInchcape Retail UK
part one
Where are we now?
1.08 1.20 1.17 1.17 1.20 1.23 1.25 1.25
1.49 1.24 1.17 1.17 1.20 1.23 1.25 1.25
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2004 2005 2006 2007 2008 2009 2010 2011
Retail Fleet
Forecast new car market
Source: 2004 – 2007 SMMTSource: 2008 – 2011 Average JD
Power & Global Insight
2.572.44
2.33 2.33 2.40 2.46 2.49 2.49
6.46.6
7.2
6.8
7.3
5.8
6.0
6.2
6.4
6.6
6.8
7.0
7.2
7.4
2001 2002 2003 2004 2005
Used car market
Source: BCA Used Car Report
£28.1bn
£32.0bn
£30.0bn
£32.3bn
£26.4bn
Volu
me
mill
ions
25.0
25.5
26.3
27.0
27.5
28.0
28.6
29.3
29.9
30.3
30.7
0
5
10
15
20
25
30
35
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Car Parc: 1995 – 2005
Source: SMMT
Vehi
cles
mill
ions
Inchcape UK
• Scale multi-franchise dealer group– 111 Dealerships– 93 locations– 20 Franchises– 4 Core regional markets
Inchcape UK continued
• Inchcape is 2nd largest UK retail group based on turnover*
• Clear strategy of scale with core partners– BMW/Mini
– Mercedes-Benz
– PAG
– Toyota/Lexus
– VW/Audi
• Inchcape share of franchised dealerships circa 3%
• Market consolidation ongoing
* Source: AM Top 100
Inchcape UK continued
• Multiple value drivers– New– Used– Finance & Insurance– Servicing– Parts
• Franchised dealerships growing share of used car market
• Sustainable Car Parc growth will help drive aftersalesrevenue
UK – top retailers
Rank Dealer Name Turnover New Units Used Units
1. Pendragon 5,624 N/A
31,463
N/A
62,623
44,368
86,587
17,372
N/A
31,201
20,251
N/A
2. Inchcape Retail 1,820 36,023
3. Sytner 1,780 N/A
4. Arnold Clark 1,670 105,191
5. Lookers 1,291 33,753
6. Camden Motors 1,265 22,973
7. Daimler Chrysler 1,200 19,832
8. Jardine Motors 904 N/A
9. Ford Retail 814 23,520
10. EMH 667 15,920
Current portfolio
UK retail statistics
H1 2006 Total growth Like-for-like growth
VolumeNew 11,695 12.1% 8.1%Used 19,583 7.1% 9.1%
Revenue (£m) 730.3m 5.4% 3.4%
Operating margin 2.9% 0.7 ppts 0.7 ppts
part two
The way forward
Retail market trends
• Continued consolidation of UK dealer groups
• Small/medium sized groups looking to exit
• Increased investment costs
• Stable new car market
• Greater opportunities in used sales and aftermarket as franchised dealers grow share
We will drive like-for-like profit growth through key value drivers
Vehicle Service PartsQuality ofrevenues
• Retail/fleet mix • Scale OEM
relationships/Internet
• Inchcape Advantage
• Service mix• Vehicle health
checks• Centralised
service booking• Express service
• Service/trade mix• On-line parts
sales• Market area parts
distribution
Flow through
• Margin/car• Used car
purchasing power• Market forces F&I
model
• Recovery rates• Sold hours• Efficiency - off
site• PDI• Yield management
• Margin• PDI initiatives to
increase retail mix
• T/O employee
Working capital
• Stock Profile/age• Debtors
• Debtors • Stock• Debtors
We will drive like-for-like profit growth through key value drivers
CRD: Entering sales process
Enquiries
Conversion : sales and other products
Customer Satisfaction
Retention
• Like-for-like sales growth through improved conversion rates
• ‘Big 4’
• Meet and greet
• Test drives
• Acknowledgement
• Parking
• 7 KPIs – Track effectiveness/improvements
• Ongoing research – we understand our competitors better than the competition
•Improved service retention
•Increased purchase retentionCRM Strategy
Summary
• Stable market driving increased vehicle Parc• Multiple revenue streams – sales and aftersales• Successful core partner and regional concentration
strategy• Significant growth opportunities
– Further market consolidation– Gold Standards to drive economic profit
John McConnellChief Executive
Australia/New Zealand
part one
Where are we now?
Distribution overview
Market growth – Australia
553,
673
529,
452
588,
511
589,
985
608,
804
601,
000
540,
240
177,000180,292173,087150,578
138,064116,236105,510
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2000 2001 2002 2003 2004 2005 2006 F
Total passanger SUV
Subaru business
2005 Five year CAGR
Vehicle volume 36,044 +6.2%
Car Parc 318k +8.8%
Parts £34m +14.1%Dealers
Dealer throughput103350
Subaru market share
Market YTD August volume Change
Total market 642,383 -3.4%
Subaru 24,896 +0.1%
Subaru share 3.9% +0.2%
Subaru segments Volume Growth
Small 146,686 +3.0%
Medium 56,605 -3.6%
Compact SUV 51,534 -0.7%
Total 254,825 +0.7%Subaru share 9.8% -0.1%
Business evolution
CUSTOMER
ImporterSold cars to dealers
AdvertiserHelped network sell cars
Marketer• Create brand• Build network• Quality sales• CRM
Retail• Grow brand• Real time• Experiences
Subaru market share by country
Volume (units) Market share
Japan (excl mini cars)
Japan (inc mini cars)
108,649
258,217
196,002
36,044
15,966
9,401
Germany 10,132 0.3%
United Kingdom 8,926 0.4%
USA 1.1%
Australia 3.6%
2.8%
4.4%
Canada 1.0%
Switzerland 3.6%
Volume and share: 2005
Subaru Parts
0
5
10
15
20
25
30
35
40
2001 2002 2003 2004 2005
£m
Subaru parts
• Five year CAGR 14.1%
• Separation of sales/marketing and logistics
• Focus on 18 wholesale Parts dealers
• Trade sales programs
• Establishment of Preferred Repairer Network
• Price matching initiative
• High first pick availability
Retail overview
Top 20 Australian auto retailers
Rank Dealer name Sales volume Market share Turnover
1. AP Eagers 24,400 2.5% $1,076m
2. Automotive Holdings 22,000 2.2% $1,100m
3. WFM 19,000 1.9% $950m
4. Suttons 18,200 1.8% $910m
5. McGraths 14,500 1.5% $728m
6. Australian Automotive Group 12,900 1.3% $675m
7. Inchcape 11,700 1.2% $600m8. Peter Warren 10,700 1.1% $535m
11 – 20 Other 59,050 5.9% $3,238m
9. Tynans 10,600 1.1% $530m
10. Zupps 9,800 1.0% $500m
TOTAL 212,850 21.5% $10.8b
Retail market trends
• Retail – Operating margin
• Average 2.0%
• Top 30% average 2.7%
– Volume driven by ‘offers’
– Manufacturers require improved/standalone facilities
– Consolidation phase as entrepreneurial owners look to exit
– Manufacturers starting to accept corporate ownership
SYDNEY• Subaru (3), VW (2), Hyundai, Kia• Total of 4,400 units (2005)
Australia: three core regions
Melbourne
MELBOURNE• Subaru (4)• Total of 4,900 units (2005)
BRISBANE• Subaru (2), Hyundai (2), Kia (2), Mitsubishi (1)
• Total of 1,900 units (2005)Queensland
New South Wales
Victoria
Brisbane
Sydney
Northern Territory
South Australia
WesternAustralia
Australia retail statistics
H1 2006 Total growth Like-for-like growth
VolumeNew 5,715 17.7% 5.0%Used 2,132 30.9% 9.6%
Revenue (£m) 111.1m 8.9% 2.6%
Operating margin 3.9% 1.2 ppts 0.8 ppts
ROCE 14.9% 5.0 ppts 5.9 ppts
part two
Where are we going?
Distribution overview
Product life-cycle
Subaru Line-up
2007
TRIBECA�OUTBACK�LIBERTY
�FORESTER�IMPREZA
200820062005
� Face Lift
New Product
Full Model Change
We will drive like-for-like profit growth through key value drivers
Vehicles
Quality of revenues
• Innovation and special editions• Subaru experience
- Premium branding- Lead generation and management- Repeat sales
Flow through • Marketing effectiveness• Overhead cost management
Working capital • Vehicle Forward Order System• Total network stock ageing
Network quality• Market mapping and network strategy• Retail sites: locations, scale, representation• Dealers operating standards
We will drive like-for-like profit growth through key value drivers
Parts
Quality of revenues• Service loyalty• Decongestion of workshops utilising Centralised PDI
Flow through • Strategic pricing of price sensitive items• Sales/employee
Working capital • Stock level and availability• Stock age
Network quality• Repair sites: location, scale, representation• Operating standards
Inchcape advantage
• 23% Inchcape volume/77% independent dealers• Consistent delivery of Subaru Experience• Visibility of consumer demand• Improved marketing effectiveness
Increased sales and lower operating costs
Retail overview
We will drive like-for-like profit growth through key value drivers
Vehicles
Quality of revenues
• Inchcape Advantage- Lead Generation & Management- Repeat Sales
• Used car growth
Flow through • F&I penetration & income/car• Overhead cost management
Working capital • Stock aging• Debtor management
We will drive like-for-like profit growth through key value drivers
Service & Parts
Quality of revenues• Quick service• Customer retention programs
Flow through • Utilisation of AutoNexus to decongest service facilities• Yield management
Working capital • Stock aging• Debtor management
Inchcape advantage
• Improve monthly traffic 329 average (2006)• Improve conversion/traffic 74% (2006)• Improve orders/traffic 27% (2006)• Improve customer advocacy (Net promoter score)
• Retail partner of choice• Improved operational performance
Summary
• Market outlook is positive• Customer centric operational excellence• Organic growth:
(i) Distribution- New products- Parts
(ii) Retail- New /used- F&I- Parts & Service
• Retail market consolidation opportunities
Dale ButcherGroup Development Director
Business model: expansion
Distribution Retail
Developedcountries
Developingcountries
Mainstream, niche or emerging brands
• Consolidation • Fewer, bigger,
better retailers
• Market growth• Network
development• Opportunity to
develop scale retail operations
Distribution: key opportunities
Niche Mainstream
Developedcountries
Developingcountries
• Initial scale and capability may favour independent distributors, particularly if linked with retail
• Pressure to reduce costs may lead to a re-assessment of traditional National Sales Company functions
• Potential scale, capability and market knowledge favour independent distributors
• Potential scale and capability favour independent distributors
Retail expansion: developed countries
• Key market priorities– UK– Australia– Belgium– Greece– Chile– Continental Europe
• OEM retail partnersExisting– Toyota/Lexus– Subaru– Volkswagen– Mazda– Mercedes-Benz– BMW
Current countries:Expand retail footprint with brand partners
New scale countries: Consider if scale unit economic returns can be achieved
New– Audi– Honda
Western Europe – unit economicsNew Unit sales per outlet - Western Europe
050
100150200250300350400450500
UK France Germany Italy Spain Belgium Greece
Uni
t sa
les
per
outl
et
2005
EBIT return on sales
0
0.5
1
1.5
2
2.5
UK France Germany Italy
Market share of top 50 independentgroups
05
101520253035404550
UK France Germany Italy
• UK consolidation has already commenced, with higher returns seen compared to rest of Europe• European consolidation will lead to improved returns and increased market concentration
Source: GMAP handbook, JD Power, Inchcape, ICDP
Country growthNew car sales vs GDP per capita - 2005 and 2010
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
0 5 10 15 20 25 30 35 40 45 50
New car sales per 1000 population
GDP
per
cap
ita (U
S$)
GreeceCzech Republic
Slovakia
Russia
Romania
ItalySpain
Finland UK
Germany
FranceJD Power 2005
Poland
Hungary
JD Power 2010
Estonia
Lithuania
Latvia
Developing markets:• Lower GDP per capita• Greater market potential - higher
forecast growth in sales per population
Developed markets:• Higher GDP per capita• But slower forecast growth in sales per
population
Source: EIU, JD Power
Poland
Eastern Europe: new car sales
.
BOSNIA-
Slovakia
Hungary
Romania
Russia – foreign imports
236
446
225
127
315
216
Estonia
Lithuania
Latvia
44%a 16%
7.7%
13.6% 3020
301712.5%
9.0%
12.0%
2715
12.8%
6.0%
5776
229199
2.8%
7.9%
Czech Republic
-3.9%
8.0%
-6.9%
32.7%
-4.8%
12.5%
23.7%
21.5%
(a) CAGR is 2002-5 for Russia
561
1,200
All figures in thousands2005 2010CAGR
01- 05 05-10
Source: EIU, Global Insight, Inchcape forecasts
Eastern Europe – unit economicsNew units per outlet
0
200
400
600
800
1000
1200
Bulgaria Croatia CzechRepublic
Estonia Hungary Latvia Lithuania Poland Romania Russia
2005 2010
2005 Western Europe average
Source: GMAP handbook, JD Power
Toyota BalkansToyota / Lexus VIR – 4 outlets
Romania, Bulgaria (also Macedonia and Albania)
2005 summary
6,835 unit sales (distribution)
Revenue £94.5m
Eastern Europe – Inchcape presence
.
Inchcape Baltics
Mazda / Jaguar / Land Rover VIR (Estonia / Latvia) – 5 outlets
Mazda / Jaguar / Land Rover Distribution only (Lithuania)
2005 summary
2,587 unit sales (distribution)
Revenue £27.2m
Inchcape Motors PolandBMW / Mini retail in Warsaw and Wroclaw – 2 outlets
2005 summary
132 unit sales
Revenue £6.6m
Key priorities – Eastern Europe
Overview• Romania and Bulgaria EU entry approved for Jan 2007
Progress and strategy• Increase own retail presence in Romania and Bulgaria
and develop potential retail acquisitions• Acquire retail businesses in the Baltics• Build scale in Poland through acquisition• Identify VIR opportunities where appropriate• Development of scale profitable businesses in other
Eastern European markets, where applicable
Russia: Inchcape presence
Axel “Pulkovo”Toyota, Lexus
Axel “Axel Car”Lexus
•Axel “Piscarevski”•Toyota
Toyota Volgogradsky
Toyota Kievka
St Petersburg2 Toyota retail & service centres
1 Lexus retail & service centre
1 Lexus showroom
Moscow2 Toyota retail & service centres
Due to open towards end of 2007
Key priorities – Russia
Overview• Market continues to exhibit rapid growth – foreign brand
sales in 2006H1 increased 55% year-on-year to over 400k units• Continuing stream of announcements by OEMs on new
manufacturing facilities in Russia: Toyota, Nissan, VW
Progress and strategy• Anchor points established for Toyota/Lexus in Moscow and St
Petersburg• Senior and experienced local team now recruited• Develop opportunities with Toyota in the regions• Acquire existing dealer groups• Develop further greenfield opportunities
China: Inchcape presence
Shanghai
Hubei
Hunan
Hong Kong
Beijing
Tibet
Xinjiang
Qinghai
Gansu Inner Mongolia Liaoning
Jilin
Heilongjiang
ChongqingSichuan
Ningxia
Shaanxi
Fujian
GuangxiYunnan
Guizhou
Hebei ShandongShanxi
Jiangxi
Hainan
Jiangsu
Zhejiang
Guangdong
Tianjin
Henan
AnhuiHubei
Hunan
Shanghai
Shaoxing
Shanghai1 Lexus dealership – due to open 2008
Shoaxing1 GZ Toyota dealership – due to open end-2006
1 Lexus dealership – due to open end-2007
Key priorities – China
Overview• Continued strong
growth in market - >30% CAGR
since 2001• Concentration in
major citiesProgress and strategy• Complete build of newly awarded
sites for Toyota and Lexus in Shaoxingand Lexus in Shanghai
• Assess acquisition/greenfield opportunities for a select number of OEM partners— First Auto Works (FAW) Toyota— Honda— Mercedes-Benz— BMW— Audi— Acura
• Monitor industry consolidation and profitability trend
Shanghai
Hubei
Hunan
Hong Kong
Beijing
Tibet
Xinjiang
Qinghai
Gansu Inner Mongolia Liaoning
Jilin
Heilongjiang
ChongqingSichuan
Ningxia
Shaanxi
Fujian
GuangxiYunnan
Guizhou
Hebei ShandongShanxi
Jiangxi
Hainan
Jiangsu
Zhejiang
Guangdong
Tianjin
Henan
AnhuiHubei
Hunan
Greater Beijing AreaParc 2,332k
% of China mkt19.9%
Greater Shanghai
Area2003 sales1,570k
% of China mkt13.4%
Guangdong Province2003 sales1,607k
% of China mkt14.3%
Source – BCG research
Other markets for consideration
India• Rapid growth in new car sales – forecast CAGR to 2010
is c.15%*. Total new car market c.1 million in 2005• Initiating research to clarify market opportunity
Turkey• Attractive economic fundamentals; relatively strong
forecast GDP growth and start of negotiations for EU membership should attract investment
• OEMs are increasing manufacturing presence in Turkey,as centre for Eastern/South-Eastern Europe sales
* Source: Global Insight
Other markets for consideration
South Africa• Favourable economic environment and strong
consumer confidence resulted in expected 10% growth in new car sales in 2006
• Large scale established dealer groups lead sales in market
USA• Mature market. Assess scale and profitable entry
opportunities
Development team
Roles and responsibilities• Together with each Business Unit, create opportunities to
expand number of sites by acquisition or greenfield• Develop new markets using external parties where
appropriate• Build on existing OEM relationships for both distribution and
retail• Introduce new OEM partners for both distribution and retail• Manage the Group pipeline process• Project management of new site construction or
redevelopment• Oversee major transactions
Development team
Resources• Development team comprises 10 people
• Primarily London-based team together with Country Managers in Russia and China to drive opportunities in these key markets
Development team – pipeline process
Market Research
Validation Business Plan Transaction Completion/ Post Investment Review
• Market research• OEM opportunities• Optimal brand
cocktail• Scale potential
• Target/site confirmed
• Preliminary analysis• Confirm strategic fit
• Detailed financial evaluation
• Management capability
• Funding structure• Integration plan
GCC/Board approval
• Due diligence• Legal agreements• Negotiations
• Monthly track versus economic profit
• Annual review vs. business plan
Positioned to capture future opportunities
Emil Frey
Kroymans
Berge
Porsche Holdings
Jardines
Sime DarbyInchcape
Pendragon
UAG Sytner
Bilia ABSummit
Rolf
TTC
Lookers
Porsche France (PGA)
0
2
4
6
8
10
12
14
16
0 2 4 6 8 10 12 14 16# Core countries of operations
# br
ands
(by
man
ufac
ture
r)
The retailer of choice globally
for our OEMpartners
National players:- Multi-franchise- Single market
Brand specialists:-European outlook
- Single brand
Chasing pack:-Retail or distribution specialists
André LacroixGroup Chief Executive
Investment case
• A unique business model with consistent financial track record
• Margin enhancement through continuous business improvement
• Diversity of earnings• Long standing relationships with high growth brand
partners• Growth opportunities in both developed and
developing markets• Strong cash flows to fund future acquisitions and
investments
The leading international automotive distributor and retailer
Disclaimer
The information and opinions contained in this presentation are provided as at the date of the document.
Certain statements in this presentation, particularly those regarding the future prospects of Inchcape Plc (“Inchcape”), returns, pricing, acquisitions, divestments, industry growth or other trend projections are or may be forward-looking statements. These forward-looking statements are not historical facts, nor are they guarantees of future performance. Such statements are based on current expectations and belief and, by their nature, are subject to a number of known and unknown risks and uncertainties which may cause the actual results, prospects and developments of Inchcape to differ materially from those expressed or implied by these forward-looking statements.
Except as required by any applicable law or regulation, Inchcape expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this presentation to reflect any change in Inchcape’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
All information in the presentation is the property of Inchcape Plc and may not be reproduced or recorded without the written permission of the company. Nothing contained in the presentation constitutes or shall be deemed to constitute an offer or invitation to invest in or otherwise deal in any shares or other securities of Inchcape Plc.
Appendix
Definitions
ROIC (%) = Trading profit
Business assets
Business assets = intangible assets + property, plant & equipment + working capital
= inventories + debtors + creditors
Trading profit = operating profit before exceptional items and central costs
Like-for-like A newly built, relocated or acquired site is counted as like-for-like from the first day of the 13th month of ownership
A relocated, closed or sold site is excluded from like-for-like on the day of relocation, closure or sale
Economic profit
* Cost of debt is included in profit after tax. Tax is included at the actual rate for the year** This is based on an estimated of cost of equity of 8.5% using published data on risk free
rates and Company Beta, and advisors estimates of market risk premium
2005 H1 2006
Recurring profit after tax* 143.4 88.3
Minority interests (3.8) (1.9)
Equity charge** (46.1) (25.8)
Economic profit 93.5 60.6
