Nigel Stein

CHAIRMAN’S STATEMENT

Nigel Stein

I am pleased to report on a year of significant strategic progress that saw the business further refocused around its core Distribution activities. We entered a number of new markets, realised significant value through the disposal of non-core assets and have announced a share buyback programme, returning £150m to shareholders.

VALUE CHAIN

Full spectrum distribution

Our Brands

Long-standing partner relationships

Inchcape has long-standing partnerships with the world’s leading automotive groups, with a core focus on manufacturers of premium and volume passenger vehicles.
  • Seven Core Partnerships
    • 52 YEARS
    • 49 YEARS
    • 42 YEARS
    • 32 YEARS
    • 31 YEARS
    • 30 YEARS
    • 27 YEARS

We have long-standing relationships with each of our seven core OEM partners, the majority of which are built around exclusive Distribution contracts in multiple markets.

In select markets we also represent commercial and agricultural vehicles and machinery as well as emergent passenger vehicle brands.

The OEMs (original equipment manufacturers) with which Inchcape works are some of the foremost drivers of technological innovation in the automotive industry, from advances in hybrid and battery electric drivetrains to future mobility solutions.

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Toyota

Our partnership with Toyota is the biggest and longest standing in our portfolio, with over 50 years of representation as a distributor in geographies that now reach from South East Asia to East Africa and from Europe to the Americas. Our partnership with TMC includes all variations of our business models – Distribution with exclusive Retail, such as in Hong Kong and Singapore; Distribution with a managed Retail network, such as Greece; and Retail only, such as our operations in the UK. The partnership also extends to both passenger and commercial vehicles.

Toyota Motor Corporation

DISTRIBUTION

Hong Kong, Macau, Guam, Saipan, Singapore, Brunei, Greece, Belgium, Luxembourg, Bulgaria, Macedonia, Romania, Albania, Ethiopia & Djibouti


Chile & Colombia (Hino only)

RETAIL

UK, Russia

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JAGUAR LAND ROVER

Inchcape and Jaguar Land Rover’s partnership is our second longest standing, stretching back nearly 50 years in total. We have continued our JLR growth story right up to the present day, with Distribution contracts awarded for Thailand in 2016, and Colombia and Kenya in 2018. We now represent Jaguar and Land Rover as either a distributor or retailer in 10 markets on three continents.

Jaguar Land Rover

DISTRIBUTION

Thailand, Hong Kong, Macau, Colombia, Finland, Estonia, Latvia, Lithuania, Kenya

RETAIL

UK, Russia

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SUZUKI

We have a long-standing partnership with Suzuki of over 40 years, the majority of that time being in Singapore. However, we significantly expanded this relationship in 2018 through acquisition and awarding of the Distribution contracts in Costa Rica, Panama and Argentina. This expansion added to our established South America platform with our first move into Central America and the addition of two brand new markets to our global portfolio.

Suzuki

DISTRIBUTION

Costa Rica, Panama, Singapore, Argentina

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DAIMLER

In 2019 we signed our first ever Distribution contracts with Daimler for both passenger and commercial vehicles in Uruguay and Ecuador, followed swiftly by a further agreement in January 2020 to become the distributor for Mercedes-Benz passenger vehicles in Colombia. This significant expansion of our Daimler relationship was built on the strong foundations of a long partnership in our UK Retail market, dating back to 1985.

Daimler

DISTRIBUTION

Uruguay, Ecuador, Colombia

RETAIL

UK

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VW Group

Inchcape has a retail-only partnership with VW Group and represents the core VW and Audi brands as well as the performance marque Porsche. Our VW Group relationship extends to over 30 years and we are present today as a Retail operator in the UK and Russia, following the divestment in 2019 of our retail sites in China and Australia.

VW Group

Retail

UK, Russia

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BMW GROUP

Our partnership with BMW Group is 30 years strong and has been a key focus for consolidated growth, especially in the Baltic region where we now represent the brand in all three countries: Estonia, Latvia and Lithuania. Additionally, in 2019 we were awarded the Distribution contract for Kenya with a view to creating a BMW platform in East Africa. As well as holding Distribution contracts in South America, we also have significant operations of BMW Group’s brands in our Retail-only markets: UK, Poland and Russia.

BMW Group

DISTRIBUTION

Chile, Peru, Latvia, Lithuania, Estonia, Guam, Kenya

RETAIL

UK, Russia, Poland

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SUBARU

Inchcape’s Distribution partnership with Subaru is one of the most important in our portfolio and an example of the close collaboration between us and our brand partners. We distribute and operate the brand in Australia, maintaining Subaru’s highest share globally in that market. Subaru was the OEM brand central to our first significant expansion in South America in 2016 which has helped to create a platform for further growth in the region.

Subaru Corporation

DISTRIBUTION

Australia, New Zealand, Chile, Colombia, Peru, Argentina

CHIEF EXECUTIVE’S REVIEW

Stefan Bomhard

It is my pleasure to present this review of 2019, a year in which we continued to deliver significant progress towards achieving our strategic objective of transforming the Group around our proven Distribution model.

Stefan Bomhard

OUR STRATEGY

IGNITE: Our optimisation and growth strategy

Inchcape’s strategic objectives are what drives the business. With the twin focal points of our customers and OEM partners at the heart of the strategy, Ignite combines five objectives to bring to life our vision to become the world’s most trusted automotive Distributor and Retailer.

Lead in customer experience

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  • Objective

    As the global automotive industry rapidly evolves, the purchasing behaviour and service-level expectations of consumers are clearly changing. We will invest to maintain our position as leader in customer service innovation in automotive Distribution and Retail, with digital a key priority

  • Priorities

    Build digital and data capabilities at Group and market levels

    Improve mobile performance to better reflect customers’ preferences

    Optimise digital traffic to improve online performance

    Introduce structured measurement to improve customer experience

  • Progress in 2019

    Omni-channel customer journey launched in Subaru Melbourne with customers able to trade-in, finance & reserve vehicles online and in-store

    Market improvement in website performance across all markets with improved speed, structure and search engine navigation, indexing & ranking

    Reputation.com introduced and rolled-out across all markets to measure and improve customer experience

    Significant like for like improvement on reputation.com scores, surpassing our annual goal across all regions

Become the OEM partner of choice

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  • Objective

    We have a very strong portfolio of brands. We now need to build on our OEM partnerships to ensure that we thoroughly deserve to achieve the status of ’partner of choice’ across all our relationships, and then to robustly defend that position

  • Priorities

    Understand and support our OEM partners’ objectives

    Ensure we maintain and reinforce contact with OEM partners

    Maintain and grow market share for existing partners

    Partner with OEMs to consolidate regional Distribution markets

  • Progress in 2019

    Increased collaboration with a number of key partners on strategic projects such as Grab & Uber in Singapore

    Over 20 top-to-top meetings throughout 2019

    Two major acquisitions which build on regional presence in key markets

    The addition of Daimler as a distribution partner in Ecuador and Uruguay

Deliver the full potential on all our revenue streams

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  • Objective

    The addressable market for Aftersales is set to grow faster than New car sales. The Used car market, which is typically a multiple of that of New cars in most of our territories, is a further growth opportunity. Finance & Insurance (F&I) is another significant focus for growth

  • Priorities

    Implementation of Aftersales playbooks in all territories including new markets

    Strong focus on extending F&I product coverage to more of portfolio

    Deploying proven Used car initiatives to grow GPU

  • Progress in 2019

    Development and roll-out of common best practices (Aftersales playbook) across all regions

    YoY growth in F&I income from roll-out of new finance renewals strategy (AutoFutura) and fabric & paint protection products

    Costa Rica Used cars turned to profit in first year of ownership

Leverage our global scale

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  • Objective

    We aim to maximise the opportunity of our unique position in the automotive industry to share more expertise and best practice across our organisation, leveraging our global scale to improve collaborative working and cost optimisation

  • Priorities

    Development and initial implementation of procure-to-payment (P2P) programme

    Continue to drive savings through extension of procurement initiatives to new opportunities for centralised purchasing

    Demonstrate shared best practice globally through extending rollout of commercially successful initiatives

  • Progress in 2019

    Implementation of Coupa P2P programme delivering significant benefit in terms of simplification, productivity and cost savings

    Achieved F&I income and procurement savings targets in 2019

Invest to accelerate growth

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  • Objective

    The automotive Distribution and Retail markets are highly fragmented; we apply a disciplined use of capital to fuel further growth through selective participation in market consolidation

  • Priorities

    Continue to develop rich pipeline of relevant M&A opportunities

    Focus on acquisitions in strong growth potential, small- to medium-sized markets

    Build regional platforms of consolidated Distribution contracts to support OEMs, leverage our scale and drive improvements in customer experience

  • Progress in 2019

    Continued industry consolidation in 2019 through acquisition of exclusive distribution for BMW Lithuania and Daimler passenger cars and trucks in Uruguay and Ecuador

    Further integration of the acquired Rudelman business into our Latin America platform

Richard Howes

OPERATING AND FINANCIAL REVIEW

Gijsbert de Zoeten

I am pleased to present the end of year Operating and Financial Review, my first since joining Inchcape in September 2019.

KPIs

Key Performance Indicators

  • Revenue
    £9.4bn
    2018: £9.3bn
  • Operating Margin
    4%
    2018: 4.3%
  • PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS
    £326.3m
    2018: £350.6m
  • FREE CASH FLOW
    £212.9m
    2018: £278.9m
  • RETURN ON CAPITAL EMPLOYED
    22%
    2018: 22%