First half 2020 results

30 July 2020

Duncan Tait

Group CEO

Gijsbert de Zoeten

Group CFO

Income statement

Change yoy%

Covid-19 had a material impact

£m (unless otherwise stated)

1H20

1H19

Reported

Constant FX

Organic

• Topline outperformance vs market

Revenue

3,019

4,725

(36)%

(35)%

(29)%

volumes

Operating profit

28

180

(84)%

(84)%

• Market closures had a significant

Operating margin %

0.9%

3.8%

(290)bps

(290)bps

impact on results

Profit before tax

9

156

(94)%

(94)%

• Exceptional charges of £198m; majority

Basic adjusted EPS (p)

(0.6)

28.6

(102)%

(£185m) related to impairment

of goodwill (Retail) and various sites

Dividend per share (p)

-

8.9

(100)%

NB. all figures are stated pre-exceptional items

First half 2020 results - 30th July 2020

4

Distribution

Change yoy%

£m (unless otherwise stated)

1H20

1H19

Reported

Constant FX

Organic

Revenue

1,730

2,421

(29)%

(27)%

(29)%

Operating profit

46

160

(71)%

(71)%

% margin

2.7%

6.6%

(390)bps

(400)bps

Results hit by wide-spread market closures

  • Geographic diversification helped support performance
  • Positive operating profit albeit at lower levels

First half 2020 results - 30th July 2020

5

Distribution operating profit bridge

160

58

24

11

18

46

3

1H19

Asia

Australasia

Europe

Americas & Africa

Translation FX

1H20

operating profit

operating profit

NB. figures above are quoted in £m

First half 2020 results - 30th July 2020

6

Retail

Change yoy%

£m (unless otherwise stated)

1H20

1H19

Reported

Constant FX

Organic

Revenue

1,289

2,304

(44)%

(43)%

(30)%

Operating profit

(18)

20

(188)%

(190)%

% margin

(1.4)%

0.9%

(230)bps

(230)bps

The two key markets impacted by prolonged closures

  • UK and Russia (>90% of the segment's sales) impacted by >10 weeks of closures
  • Limited flexibility of costs weighed on performance

First half 2020 results - 30th July 2020

7

Cash flow: very effective inventory management

Net cash bridge (£'m)

Free-cash flow = £(5)m vs £25m in 1H19

2212

2813

38

32

16

0

9

103

32

89

Opening Net Cash @ Dec-19 [IAS17]

Operating profit

D&A net of lease payments

Working capital

Pension/ NCI/ Other

Net interest and tax

Net capex

Net M&A

Dividends

Share buybacks

FX / Other

Closing Net Cash @ Jun-20 [IAS17]

Supported by collaboration with OEMs

  • Lower operating profit offset by strict working capital discipline, and reduced capex and taxes
  • Inventory management in collaboration with our OEM partners
  • Dividend and share buyback cancellations helped preserve cash

NB. Closing (net debt) on an IFRS16 basis was £(262)m at end of June-2020; compares to £(250)m at Dec-2019

First half 2020 results - 30th July 2020

8

Liquidity update: strong balance sheet

Net cash

£103m

£(187)m

£(210)m

£89m

Total Liquidity

£889m

£600m

>£700m

>£1,000m

530

480

31-Dec-19

07-Apr-20

20-May-20

30-Jun-20

Available cash

RCF headroom

CCFF headroom

Liquidity position further strengthened

  • Liquidity of >£1,000m vs £889m in Dec-19
  • Collaboration with OEMs has supported the liquidity position during market lockdowns
  • Repaid UK CCFF (£100m) in July; liquidity remains available until Dec-20

First half 2020 results - 30th July 2020

9

Covid-19 update: key market status

Asia-Pac

Europe

Americas & Africa

7th April

21st May

Status today

Australia

Hong Kong

Singapore

Belgium

Greece

Romania

Russia

UK

Chile

Colombia

Peru

Costa Rica

Ethiopia

Market status (today)

  • Open: 30 markets
  • Closed: 3 markets

Open

Key:

Closed

Group

(open markets

30%

40%

95%

% 2019 revenues)

First half 2020 results - 30th July 2020

10

Sales trend gradually improving as markets reopen

Group organic revenue growth (yoy%) development

1Q20:

Apr-20

May-20

Jun-20

(6)%

(18)%

2Q20:

Aftersales sales growth

(51)%

c.20% above Vehicles

(59)%

(76)%

Jan-Feb: performance

Markets representing c70%

Markets representing c60%

Markets (mainly Americas)

ahead of internal

of revenues were closed

of revenues were closed

representing c10% of

expectations

Singapore closed in early-

European Distribution

revenues were closed

March: initial impact of

April

operations started to

Singapore and UK

closures (outside of Asia)

reopen in mid-May

reopened

started to be felt

First half 2020 results - 30th July 2020

11

Market context for cost-restructuring

Inchcape markets: new car volume evolution

IHS Automotive forecasts (July)

(29)%

14%

2019

2020

2021

First half 2020 results - 30th July 2020

12

A leaner organisation, fit for focused growth

2019-PF1

Overhead

Restructuring

overheads

savings

costs

£855m

>£90m

c.£70m

Following significant

Reducing headcount (10%),

Process well-underway

Retail disposals

third-party spend and

footprint rationalisation

c.50% of savings retained when

Cash-cost c.£50m

revenue recovers

1) 2019-PF: 2019 reported figure adjusted for disposals and acquisitions

First half 2020 results - 30th July 2020

13

Digital: continuing our investment

Key digital milestones in 1H20

  • Digital leads drove > 9,000 orders
  • Increased efficacy of digital marketing
  • Completed testing on multi-brand & language platform

Current digital priorities

  • Omni-channel: roll-outMelbourne-trial to other markets
  • Analytics: use digital information and data to drive decisions

First half 2020 results - 30th July 2020

14

M&A: alive to the consolidation opportunity

OEM

Partner

Establishing a strong platform in a new geography

Platform

dealStrategic move to enter a new geography and leverage our global scale

e.g. Indumotora (2016) & Rudelman (2018) - Americas

Leveraging existing regional infrastructure

Smaller

scale

Strengthens our regional presence and broadens our brand exposure

e.g. BMW Estonia (2017) & JLR Colombia (2018)

Selling

Inchcape

OEM looking for a new distribution partner

Distributor

Contract

win

Enabler for entry into new markets and broadening our brand exposure

e.g. BMW Guam (2018), Daimler Latam (2019, 2020) & JLR Poland (2020)

First half 2020 results - 30th July 2020

15

Capital allocation: maintaining our discipline

1

Invest in the business

Capex for organic growth and

technological investment

Retain focus on portfolio optimisation

4

Share buybacks

Suspended due to Covid-19

Policy: distribute excess FCF

(post-dividend and M&A) via buybacks

Strong

balance sheet

Net debt to EBITDA

of max 1x (pre IFRS16)

2

Dividends

To be resumed when appropriate

Policy: 40% annual payout of basic EPS

(pre exceptionals)

3

Value accretive M&A

Required return targeted

in years 2-4

First half 2020 results - 30th July 2020

16

Outlook: continued resilience

Market outlook

Strategic focus

Markets remain dynamic

• Continue to outperform market volumes

• Underlying strength of recovery is unclear

Becoming leaner and stronger

Possibility of a second-wave

Capitalising on opportunities

2020 outlook:

Too early to provide a forward-looking view

First half 2020 results - 30th July 2020

17

Duncan Tait

Group CEO

Investment proposition: growth and cash returns

Distribution at our core: A highly cash generative and sustainable business model

Strong and increasing weighting to higher growth markets supports our diversification

Ignite strategy driving organic performance ahead of market growth

Continued consolidation a material driver of value creation

Sustainable business model well placed to benefit from future industry trends

Well positioned to deliver shareholder value through organic growth, consolidation and cash returns

First half 2020 results - 30th July 2020

19

Initial thoughts: Covid-19, the great accelerator

Dial-up use of

Drive

Globalise

Deliver the

consolidation in

processes

'Inchcape

data & digital

distribution

& smart centres

Way'

Drive insights,

Help existing,

Use shared

Accelerate

efficiencies and

and new,

services and

development

growth

partners grow

automation to

by further

across a range

improve

investing in our

of markets

profitability

people

Continuing to help our OEM partners grow

First half 2020 results - 30th July 2020

20

Q&A

Appendix

Supporting our communities

Europe

APAC

Americas

Provision of vehicles

Public awareness campaign

Vehicle support for the

to Red Cross

in early stages of outbreak

Ministry of Health

First half 2020 results - 30th July 2020

23

Segmental restatements

Old

New

AS REPORTED

REVISED DISCLOSURE

Distribution

Retail

Group

Distribution

Retail

Group

1H19

FY19

1H19

FY19

1H19

FY19

1H19

FY19

1H19

FY19

1H19

FY19

Revenue

Revenue

Asia

865.8

1,681.9

865.8

1,681.9

Asia

784.1

1,522.5

81.7

159.4

865.8

1,681.9

Australasia

500.5

1,036.3

185.1

306.7

685.6

1,343.0

Australasia

517.2

1,070.9

168.4

272.1

685.6

1,343.0

UK & Europe

660.5

1,329.6

1,610.7

3,004.9

2,271.2

4,334.5

APAC

1,301.3

2,593.4

250.1

431.5

1,551.4

3,024.9

Emerging M arkets

459.3

993.5

443.2

1,026.8

902.5

2,020.3

UK & Europe

660.5

1,329.6

2,053.9

4,031.7

2,714.4

5,361.3

Total

2,486.1

5,041.3

2,239.0

4,338.4

4,725.1

9,379.7

Americas & Africa

459.3

993.5

459.3

993.5

Total

2,421.1

4,916.5

2,304.0

4,463.2

4,725.1

9,379.7

Trading profit

Asia

93.2

181.9

93.2

181.9

Operating Profit

Australasia

32.2

60.8

0.3

(1.4)

32.5

59.4

Asia

86.1

168.7

4.1

8.7

90.2

177.4

UK & Europe

21.0

43.7

11.7

17.5

32.7

61.2

Australasia

30.4

58.0

0.4

(1.2)

30.8

56.8

Emerging M arkets

25.2

67.8

7.4

20.0

32.6

87.8

APAC

116.5

226.7

4.5

7.5

121.0

234.2

Total

171.6

354.2

19.4

36.1

191.0

390.3

UK & Europe

19.8

41.7

15.5

32.2

35.3

73.9

Americas & Africa

23.5

65.0

23.5

65.0

Central Costs

(11.2)

(17.2)

Total

159.8

333.4

20.0

39.7

179.8

373.1

Operating Profit

179.8

373.1

First half 2020 results - 30th July 2020

24

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Inchcape plc published this content on 30 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 July 2020 07:25:06 UTC