Chairman’s statement
Following a year of gradual global economic and industry recovery I am pleased to report strong results for 2010. Our robust earnings growth is a testament to the strength of our broad geographic portfolio and the success of our resilient business model together with the decisive actions taken by management since the start of the downturn.
Performance
Group sales have increased by 5.4% to £5.9bn for the full year to 31 December 2010, benefiting from the start of the global recovery and our operational focus on growing market share and aftersales. On a like for like, constant currency basis, sales increased by 3.1%.
Our decisive response to changing market conditions in the last quarter of 2008 and early 2009 generated annualised cost savings of approximately £70m. We have kept our overheads flat in 2010 as we offset the cost of inflation with productivity improvements. We announced a further restructuring plan in the third quarter of 2010 to lower our cost base by an additional annualised £25m through reducing our headcount and a disposal of 10 underperforming sites. We have exceeded our expectations disposing of 15 sites and the expected annualised cost base reduction will now be £30m. This latest process has resulted in an exceptional restructuring charge of £21.9m in the fourth quarter of 2010. We are continuing to keep tight cost control measures in place throughout the Group.
Profit before tax and exceptional items of £214.0m was 38.0% higher than 2009 and adjusted earnings per share rose by 18.1% to 32.0p (adjusted for the Share Consolidation). On a statutory basis, profit before tax was £192.1m, 40.5% above 2009. Cash generated from operations during the year was £274.3m which represents a 134.7% conversion of statutory operating profit.
Capital expenditure
Whilst, in agreement with our brand partners, we continued to keep our discretionary capital expenditure to a minimum, we have made several strategic investments in 2010, opening two sites in emerging markets.
Board
Following two and a half years with the Group, Graham Pimlott stepped down as a Non-Executive Director and Chairman of the Audit Committee on 31 October 2010. Simon Borrows joined the Board on 6 October 2010 and was appointed Chairman of the Audit Committee, taking over from Graham. I would like to thank Graham for his contribution during his time with the Group.
Dividend
In line with our disclosure in this year’s Interim Report, the Board is pleased to recommence the payment of a dividend and is recommending the payment of a final ordinary dividend for the year of 6.6p. No dividend was paid or recommended in 2009 in light of the challenging trading conditions at that time.
Share consolidation
At the Annual General Meeting held on 13 May 2010, a 1 for 10 consolidation of Inchcape plc ordinary shares was approved by shareholders. The purpose of the share consolidation was to reduce the total number of shares 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. Following the share consolidation there are approximately 460m Inchcape ordinary shares in issue, reduced from approximately 4.6bn in 2009.
Approach to governance and Corporate Responsibility (CR)
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 important to us. In 2010, we established the CR Board committee, responsible for the strategic direction of the Group’s CR programme that continues to build a global approach to 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 outstanding commitment and support throughout 2010.
Outlook
Due to the uneven nature of the global recovery we remain cautious regarding the short term outlook in some of our markets. However, Inchcape is well positioned to benefit from the global recovery in most of our markets and, as such, we expect to deliver a solid performance in 2011.
Ken Hanna,
Chairman
