André Lacroix Group Chief Executive Distributor and retailer for the world’s leading automotive brands Right Markets: Right Categories: 2/3 revenues Five distinct from Asia Pacific revenue streams & Emerging offering growth / Markets defensive mix Right Brands: Right Financials: 90% of profits Attractive growth from 6 leading prospects, strong premium cash generation & OEMs robust balance sheet Distinct and attractive business model in the automotive sector 3 4 Majority of global growth in population and GDP will come from Asia Pacific and Emerging Markets Western Europe Eastern Europe & Russia North America GDP 2012: $16,847bn GDP 2012: $4,870bn GDP 2012: $17,414bn Growth 2012-17: + $2,708bn Growth 2012-17: + $2,292bn Growth 2012-17: + $4,431bn Pop 2012: 413m Pop 2012: 449m Pop 2012: 350m Growth 2012-17: + 7m Growth 2012-17: + 1m Growth 2012-17: + 17m Middle East GDP 2012: $2,559 bn Growth 2012-17: + $616bn Pop 2012: 231m Growth 2012-17: + 26m Africa Asia & Oceania South & Central America GDP 2012: $2,069bn GDP 2012: $22,350bn GDP 2012: $5,788bn Growth 2012-17: + $777bn Growth 2012-17: + $9,497bn Growth 2012-17: + $1,811bn Pop 2012: 1,060m Pop 2012: 3,858m Pop 2012: 584m Growth 2012-17: + 132m Growth 2012-17: + 199m Growth 2012-17: + 35m Source: IMF (nominal GDP, population) Updated Sept 2012 Asia Pacific and Emerging Markets will represent 94% of population growth 2012 – 17 and 71% of GDP growth 5 …this pattern is reflected in car industry growth Western Europe Eastern Europe & Russia North America TIV 2012 13.2m TIV 2012 5.1m TIV 2012 15.9m Growth 2012-17: +1.9m Growth 2012-17: +1.7m Growth 2012-17: +2.5m Middle East South & Central America TIV 2012 2.8m TIV 2012 6.7m Growth 2012-17: +0.6m Growth 2012-17: +2.1m Africa Asia & Oceania TIV 2012 0.9m TIV 2012 33.1m Growth 2012-17: +0.4m Growth 2012-17: +12.5m Source: IHS Automotive (Global Insight) / Inchcape estimates Updated Sept 2012 Asia Pacific and Emerging Markets will represent 66% of global car sales by 2017 and 80% of car industry growth 2012 – 17 6 Strong growth forecast in global car market Global TIV Global Car Parc +27% +22% 100 97 1,157 93 1,094 87 1,054 984 1,017 79 82 951 million million 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 Source: IHS Automotive (Global Insight) Source: LMC Automotive (JD Power) Growth opportunitiesGrowth inopportunities all categories: across New, the Used, value F&I, chain Service & Parts * TIV – Total Industry Volume (number of new cars sold) ** Car Parc refers to the number of cars on the road Updated Sept 2012 777 Inchcape scale exposure to fast growing APAC / Emerging Markets Inchcape % Inchcape % Inchcape Average EBIT GDP growth TIV growth Car parc markets Revenue Trading profit Margin % CAGR 2012-17 CAGR 2012-17 growth CAGR 2009-11 2009-11 2009-11 (Source: IHS Automotive 2012-17 (Source: IMF) (Global Insight)) (Source: LMC Automotive (JD Power)) Asia-Pacific & Emerging Markets 21 48% 65%5.5% +3.9% +6.6% +3.6% UK & Europe 5 52% 35%2.7% +2.3% +3.9% +0.9% More than 2/3 of Group earnings derived from high margin APAC / EM Updated Sept 2012 8 Inchcape is focused on high growth regions Global Vehicle Sales* Inchcape Trading Profit Mix** Russia and Middle East E Europe & Emerging 4% Africa Russia 1% Markets Australasia 7% 21% 21% South & Central Asia & America Oceania 9% 41% North America North Asia 19% UK 16% 23% South Asia W Europe Europe 10% 19% 9% * 2011 Total Industry New Light Vehicle Sales (Source: IHS Automotive) ** 2011 9 10 Leading premium brands as core partners Six core relationships deliver c90% of profit Strong R&D Premium capability to brand’s pricing lead powertrain power deliver and segment superior innovation margins Portfolio of the world’s leading premium automotive brands Creating value with the world’s leading automotive brands 11 Inchcape’s brand partners outperform • Premium & luxury OEMs forecast to outperform the Cars: upmarket growth in top gear overall market “There are good reasons for thinking this market trend will • Global luxury continue. While the phenomenal growth in Chinese car vehicle sales demand over the past decade may be cooling, the country’s appetite for premium vehicles still appears to be expanding at grew at double very healthy rates. More than 970,000 top-end vehicles are the rate of the thought to have been sold there in 2011 (15 per cent of the overall market in premium market globally) – up from under 700,000 in 2010. That figure could exceed 1.1m in 2012 (a decade ago, it was 2011 little more than 30,000). Russia, although a much smaller market, is also hot. And US demand is recovering nicely.” * FT/Lex Column January 9, 2012 12 Long Standing Relationships Inchcape length of brand relationships • Established 45 relationships with 40 brand partners 35 across multiple 30 continents 25 • Inchcape delivers Years 20 on market share 15 and customer service 10 excellence 5 0 Subaru BMW VW Mercedes JLR Toyota 13 Inchcape delivers for its brand partners Subaru Market Share* Expertise with Brand Partners • Focused portfolio of premium 4.5% 4.0% brands enabling deeper 3.5% relationships 3.0% 2.5% • Inchcape delivers best in 2.0% class performance 1.5% 1.0% • Highest global market share 0.5% 0.0% for Subaru in Australia** 1992 1997 2002 2007 2012 Australia Mkt Share Global Mkt Share * Inchcape became the distributor for Subaru in Australia in 1992 (2012 YTD) ** ex Japanese mini cars 14 Inchcape (Crown Motors) • 20 consecutive years of market share leadership in passenger and commercial vehicles • Crown Motors the world’s first distributor of all the major Toyota Group brands 15 16 Diversity of profit streams New Finance Vehicle & Insurance Growth Sales Products Value Drivers c40% of gross profit 4 Used Defensive Aftersales Vehicles Parts Value Drivers Service Sales c60% of gross profit Value driver focus delivering strong margins 17 Addressable markets beyond new vehicles Motoring costs breakdown • Significant Other motoring proportion of the costs 4% motoring value Cars, vans and chain outside of motorcycle the initial purchase Petrol, diesel and purchase other oils 32% • Aftersales and 32% Finance & Insurance offer high margin Repairs, opportunities Vehicle insurance servicing, spares and taxation and accessories 19% 13% Source: UK ONS 2009 18 Vehicle base for aftersales business Hong Kong units in operation at Dec 2011 (car parc)* • Inchcape Inchcape has a Other commanding 13% Toyota, Lexus, share of the Audi Land Rover, VW 3% Jaguar & Ford vehicles on the 3% 33% road in Hong Mazda Kong 4% Nissan • Scale presence 7% in new car mkts across the world BMW 9% provides scale in Honda aftersales Mercedes Benz 14% 14% * Source: Motor Trades Association of Hong Kong (Passenger vehicles only) 19 Singapore margin resilience Singapore TIV* Singapore Margin* Market decline of c70% 140 12.0% 120 10.0% 100 8.0% 80 6.0% 60 40 4.0% 20 2.0% 0 0.0% 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 H1 2012 Source: LTA * TIV (Total Industry Volume) refers to the number of new vehicles sold ** South Asia trading margin 20 Defensive used vehicle sales UK used vehicle volumes • UK is the most 100 important used 95 vehicle market for Inchcape 90 • Counter cyclical 85 margin dynamics (lower new car 80 supply) 75 • Used vehicles offer 70 growth potential in 2005 2006 2007 2008 2009 2010 2011 developing mkts UK New Vehicle Vol Rebased UK Used Vehicle Vol Rebased Source: SMMT and Experian 21 Trading across the right categories offers growth and margin resilience Inchcape EBIT margin & revenue • 2011 revenue 6,500 5.0% c£1.2bn from 4.5% peak 6,000 4.0% 3.5% • 2011 EBIT 5,500 3.0% margin 20 BPS 2.5% from peak 5,000 2.0% • H1 2012 PBT 1.5% back to peak 4,500 1.0% • Geared recovery 0.5% potential 4,000 0.0% 2005 2006 2007 2008 2009 2010 2011 Revenue £m (LHS) EBIT Margin (RHS) 22 23 Inchcape margin stability EBIT Margin • Cost structure for 4.5% the group is 50% fixed & 50% 4.0% variable 3.5% • £124m in operating costs 3.0% (c18% of the 2008 base) taken 2.5% out* • Defensive profit 2.0% streams 2007 2008 2009 2010 2011 Inchcape * £124m is the expected cumulative cost reduction by Dec 2012 before inflation (£99m at the end of 2011 and £25m estimated for 2012) 24 High ROCE business model ROCE • Distribution, the 25.0% core of Inchcape 23.0% (66% of Group 21.0% profit), is fixed asset 19.0% capital light 17.0% • ROCE is strong on 15.0% a lease capitalised 13.0% basis* 11.0% • Inchcape ROCE 9.0% compares 7.0% favourably across 5.0% industries 2008 2009 2010 2011 Inchcape * 2011 Group operating lease charge £48m ROCE: Underlying OP over an average of the opening and closing net assets adjusted for net debt/cash 25 Cash generative business model Robust free cash flow* • Average cash 200 conversion since 150 2005 is c135% • Strong balance 100 sheet, net cash 50 of £228m at 30 June 2012 0 • 2011 dividend -50 payout ratio 32% -100 2007 2008 2009 2010 2011 FCF (£m) * Net operating cash flow less gross capex 26 Appendix V – Definitions 27 Inchcape Customer 1 st Strategy STRENGTHEN EXPAND To be the Superior customer world’s most Consolidation in value proposition customer centric high margin / high through Inchcape automotive growth areas retail group Advantage 28 Operational discipline on Top Five Priorities Customer 1 st strategy to create differentiation Commercial initiatives to grow revenues ahead of competitors Cash initiatives to grow profit and operating cash faster than revenue Brand portfolio of the world’s leading premium and luxury automotive brands Balanced focus between commercial and cash initiatives