Inchcape plc, the leading global
automotive distributor, announces its preliminary results for the
twelve months to 31 December 2023
A strong
performance, with substantial strategic progress - Inchcape well
positioned for future growth
· Another year of strong
financial performance - double digit organic revenue and profit
growth:
o Group Revenue up 41% on a reported basis to £11.4bn, boosted
by acquisition of Derco
§ Group
organic revenue growth1
of 12%, Distribution organic growth1
of 16%
o Adjusted PBT2
up 35% to £502m and Statutory PBT up 24% to
£413m
§ Operating
profit growth and higher operating margins of 5.8% (FY 2022: 5.1%)
more than offsetting higher interest
§ Adjusted
basic eps up 18% to 84.8p
o Capital allocation policy remains unchanged, with near term
focus on deleveraging
§ Total
dividend per share up 18% to 33.9p
o ROCE of 26%, free cash
flow2 conversion ahead of guidance range of 60%-70% at
74%, with leverage at 0.8x
· Growth across each
Distribution region:
o Continued growth, market share gains and strong margins across
the Americas; but several markets remain weak, with further
slowdown in a number of markets in Q4 2023
o On-going positive momentum in APAC, supported by acquisitions
and market share gains
o Strong performance in Europe, boosted by order bank unwind,
against a muted consumer environment
· Substantial strategic
progress - a record 15 distribution contracts won, and 3
acquisitions completed, in FY 2023:
o Driven by our ability to deliver for our mobility company
partners ("OEMs" 3), particularly through our
market-leading capabilities in digital experience and data
analytics
o On
Vehicle Lifecycle Services, good progress on our parts capabilities
and used car programme, which is being re-focused on supporting
Distribution model
· Derco - integration
progressing well, despite challenging markets:
o Foundation for revenue synergies in place in the Americas and
other regions
o Accelerated cost synergies of £21m delivered in FY
2023
§ Now
expecting to deliver £10m more costs synergies, of at least £50m,
by the end of FY 2024, with integration cash costs of £70m over 3
years
o Operating margins towards the top end of 5% - 7% range
delivered, pre-synergies, in FY 2023
o Successful completion of c.£200m excess inventory
reduction
· Outlook - moderated growth in
the short term, accelerating in the medium to long
term:
o Future growth and margins to be driven by our market
leadership, cash generative business model, diversified geographic
footprint and digital-led approach, supported by acquisitions and
contract wins
o Outlook for FY 2024 - another year of growth, albeit
moderated:
§ Prudent
expectations for recovery in certain markets, which are weaker than
previous years
§ Even
stronger focus on cost management to deliver a moderated short-term
growth profile
o Medium to long term outlook - expecting to return to higher
levels of growth:
§ Many
markets, particularly in the Americas, expected to recover from what are anticipated
to be towards historical lows in FY 2024, supported by even
stronger focus on cost management
Duncan Tait, Group CEO, commented:
"Inchcape produced a strong set of
results in FY 2023, with an excellent performance across all our
regions. The business continues to deliver, with double-digit
organic revenue growth, margin progression, EPS growth and high
levels of cash generation. We maintained positive momentum across
APAC, supported by acquisitions, while Europe & Africa
performed strongly, despite muted demand. The Americas produced
growth in many markets, supported by Derco's performance, and while
some markets became increasingly challenging, we continued to take
market share across the region.
"We made substantial strategic
progress last year, with a record number of distribution contracts
won. These contracts, along with our investment in acquisitions,
will continue to support the business as we grow in existing
markets by building market share, expand into new markets, and
develop our mobility company partner portfolio to drive
growth. With our global market leadership
position, disciplined approach to capital allocation, digital and
data capabilities to support our mobility company partners and our
highly cash-generative characteristics, Inchcape is well positioned
for the future, and we remain confident about the medium to
long-term outlook for the Group."
|
2023
|
2022
|
% change
reported
|
% change
constant FX2
|
% change
organic1
|
Key financials (continuing
operations)
|
|
|
|
|
|
Revenue
|
£11,447m
|
£8,133m
|
+41%
|
+41%
|
+12%
|
Adjusted Operating
Profit2
|
£669m
|
£411m
|
+63%
|
+64%
|
|
Adjusted Operating
Margin2
|
5.8%
|
5.1%
|
+70bps
|
+80bps
|
|
Adjusted Profit Before
Tax2
|
£502m
|
£373m
|
+35%
|
+36%
|
|
Adjusted Basic
EPS2
|
84.8p
|
72.0p
|
+18%
|
|
|
Dividend Per Share
|
33.9p
|
28.8p
|
+18%
|
|
|
Free Cash
Flow2
|
£498m
|
£380m
|
+31%
|
|
|
Statutory financials
|
|
|
|
|
|
Operating Profit (continuing
operations)
|
£619m
|
£400m
|
+55%
|
|
|
Profit Before Tax (continuing
operations)
|
£413m
|
£333m
|
+24%
|
|
|
Total profit / (loss) for the
year
|
£283m
|
£(6)m
|
|
|
|
Basic EPS (continuing
operations)
|
65.6p
|
61.1p
|
+7%
|
|
|
Net cash generated from operating
activities
|
593m
|
494m
|
+20%
|
|
|
1.
Organic growth is defined as revenue growth in
operations that have been open for at least a year at constant
foreign exchange rates. This metric includes contract wins and
excludes acquisitions including Derco
2.
These measures are Alternative Performance
Measures, see Note 12
3.
Original Equipment Manufacturers
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This announcement contains inside
information.
Results presentation today
A presentation for analysts and
investors will be held today, Tuesday 5th March 2024, at
08:30 (UK time). The presentation will be held at the London Stock
Exchange, 10 Paternoster Square, London EC4M 7LS.
To register for the webcast of the
event please follow
this link, or to register for
conference call access please follow this
link.
A replay of the presentation will be
available via the Company's website,
www.inchcape.com later
today.
Financial calendar
Q1 trading update
|
25th April 2024
|
Ex-dividend date for 2023 full year
dividend
|
2nd May 2024
|
Record date
|
3rd May 2024
|
Annual general meeting
|
9th May 2024
|
Last election date
|
24th May 2024
|
Payment date
|
17th June 2024
|
H1 24 Interims
Announcement
|
30th July 2024
|
Q3 trading update
|
24th October
2024
|
Contacts
About Inchcape
Inchcape is the leading global
automotive distributor, with operations across six
continents.
By combining our in-market
expertise with our unique technology and advanced data analytics,
we create innovative customer experiences that deliver outstanding
performance for our partners - building stronger automotive brands
and creating sustainable growth.
Our distribution platform connects
the products of mobility company partners with customers, and our
responsibilities span product planning and pricing, import and
logistics, brand and marketing to operating digital sales, managing
physical sales and aftermarket service channels.
Delivering for our partners, our
customers and our people - so they can realise their ambitions in
the new world of mobility.
The Group is headquartered in
London and employs over 22,000 people globally.
www.inchcape.com
Our results are stated at actual
exchange rates. However, to enhance comparability we also present
year-on-year changes in revenue and adjusted operating profit in
constant currency, thereby isolating the impact of translational
exchange rate effects. Following the disposal of our remaining
Retail-only business in Russia (Moscow) in 2022, all figures quoted
in the 'Operational' and 'Operating and financial' reviews are on a
'continuing operations' basis and therefore exclude any
contribution from Russia in 2022.
Operational review
Key performance
indicators
|
2023
|
2022
|
% change
reported
|
% change
constant FX2
|
% change
organic1
|
Revenue
|
£11.4bn
|
£8.1bn
|
+41%
|
+41%
|
+12%
|
Adjusted Operating
Profit2
|
£669m
|
£411m
|
+63%
|
+64%
|
|
Adjusted Operating
Margin2
|
5.8%
|
5.1%
|
+70bps
|
+80bps
|
|
Adjusted Profit Before
Tax2
|
£502m
|
£373m
|
+35%
|
|
|
Free Cash
Flow2
|
£498m
|
£380m
|
+31%
|
|
|
Return on Capital
Employed
|
26%
|
41%3
|
(1500)bps
|
|
|
1. Organic growth is defined as revenue growth
in operations that have been open for at least a year at constant
foreign exchange rates
2. See note 12 for definition of Key
Performance Indicators and other Alternative Performance
Measures
3. Adjusted to remove capital employed of
Derco, which was acquired on the last day of 2022 and therefore did
not contribute to operating profit during that year
FY 2023 results - performance
review
The Group delivered a strong
operational and financial performance in 2023, driven by top line
growth and margins well ahead of historic levels, supported by a
continued shift towards our higher-margin and faster-growth
Distribution business.
Group revenue of £11.4bn (2022:
£8.1bn) rose 41% year-on-year reported, supported by organic growth
and acquisitions. On an organic
basis, excluding currency effects and net acquisitions,
revenue increased by 12%. This was predominantly driven by volume
growth, as supply continued to normalise, with some positive
pricing impact on new and used vehicles across our Distribution
businesses. We maintained positive momentum in APAC, while our
performance in Europe and Africa was supported by an order bank
unwind during the year. Volume growth across the Americas was flat,
although we continued to increase share in many markets. Retail
remained resilient.
The Group delivered an adjusted operating profit of £669m
(2022: £411m), up 63% year-on-year reported, reflecting our
continued shift towards Distribution, with organic revenue growth,
the contribution of acquisitions, Derco synergies and some
operating leverage. Adjusted
operating margins increased by 70bps to 5.8%. Included
within adjusted operating profit is a net property profit of £14m (2022:
£2m), primarily related to the sale of a property in Australia,
which more than offset impairment charges for certain retail sites.
The Group also saw translational currency headwinds of (£4m) during
the year.
Adjusted profit before tax (PBT) of £502m (2022: £373m) increased as a result of the
improvement in revenue and operating profit.
This profit performance more than
offset the increase in adjusted net
interest expense to £168m
(2022: £38m). This increase is primarily due to the shift in the
Group's capital structure from Net Cash to a Net Debt profile over
the last 12 months, following the
acquisition of Derco, and a higher interest rate
environment.
During the year pre-tax
adjusting items amounted to
an expense of £89m (2022: £40m). This was primarily driven by
acquisition and integration costs (£50m), of which (£35m) related
to Derco, the finance component of the deferred Derco dividend
payment (£10m) and non-cash, non-operational losses arising from
the adoption of hyperinflation accounting relating to Ethiopia
(£29m).
The highly cash-generative nature
of our business model drove strong free cash flow generation of £498m
(2022: £380m), representing a conversion of adjusted operating
profit of 74% (2022: 92%), above our guidance range of 60% - 70%,
reflecting a stronger working capital performance. The net
working capital inflow of £155m (2022: inflow £75m) was driven by a
£215m reduction in excess inventory at Derco and an alignment of
supplier trading terms, offset by a normalisation of working
capital elsewhere across the Group. Net interest payments in the
year increased to £130m (2022: £20m), excluding payment for leases,
for the reasons outlined above.
As at 31 December 2023, Group
adjusted net debt amounted to £601m (2022:
£378m) (excluding lease liabilities), following ordinary dividend payments of £128m, payments relating to Derco of £267m and acquisition outflows primarily for the three acquisitions in
APAC of £137m. On an IFRS 16 basis
(including lease liabilities), the Group ended the period with net
debt of £1,041m (December 2022: net debt of £877m). Group leverage
on a proforma basis was approximately 0.8x at 31 December 2023,
within the Group's internally-mandated leverage limit of 1x (pre
IFRS16).
In June 2023, the Group
successfully issued a £350m public bond, with 6.5% coupon and a
five-year maturity. The proceeds from the bond were used to
re-finance the bridge facility put in place to fund the acquisition
of Derco, the initial term for which was due to expire at the end
of FY 2023. Additionally, in December 2023, the Group's syndicated
revolving credit facility was renewed and increased to £900m,
extending the maturity to December 2028.
Return on capital employed over
the period was 26%, compared to 41% for the equivalent period last
year, driven by the dilutive effect of acquisitions, and in line
with our guidance of approximately 25%.
Q4
2023
Group revenue for the fourth
quarter was £3.0bn, up 40% reported,
reflecting the benefit of acquisitions, and organic growth of 13%, compared to +10%
in Q3. In Distribution,
revenue increased 16% organically, compared to 13% in Q3. The
sequential step-up in organic growth was driven by on-going
positive momentum across the APAC region, and the continued order
bank unwind in Europe, partially offset by a weaker performance in
the Americas. In Retail,
revenue increased 4% organically, compared to 1% in Q3, partly
supported by fleet.
Update on Derco - delivering against key metrics
We made further progress on the integration of Derco
during the year, with all mobility company partner relationships
maintained or extended, key personnel retained and the technology
integration on track.
As a result of the
acquisition, the Group
consolidated its market leadership position in the Americas,
with foundations in place for revenue synergies, to help grow
market share and further extend our mobility company partnerships
in the region. Furthermore, there were strategic benefits achieved
globally, including distribution contracts with Great Wall Motors
in Indonesia and with Changan in the Philippines and East Africa,
both of whom were historical Derco relationships.
Derco delivered a resilent
financial performance in FY 2023, with operating margin towards the top end of the 5%
-7% range of a typical distribution business, pre-synergies.
Furthermore, as a result of proactive management action,
excess inventory of c.£200m was
successfully reduced during the year, resulting in a strong
working capital inflow. This inflow was further supported by an
alignment of trading terms.
We achieved accelerated cost-related annualised synergies
in FY 2023 of £21m and we now expect to deliver an
additional £10m of annualised cost synergies, of at least £50m, by
the end of FY 2024. One-time integration cash costs of £70m will be
invested in driving these synergies, of which £35m was invested in
FY 2023, with these costs now expected to be incurred over three
years, to help support the future delivery of cost-related
synergies.
Looking ahead, we remain confident
that the high quality of the
combined Inchcape and Derco business, with its leading
market positions in the Americas, will deliver strong revenue and
profit growth in the future.
Strategic priorities
Our Accelerate strategy is focused on two
growth opportunities: Distribution Excellence and Vehicle Lifecycle
Services, supported by our Responsible Business plan: 'Driving What Matters'.
Developing our approach to
Responsible Business is
central to our future plans. It will bring us closer to our
mobility company partners and help us to recruit, engage and retain
the best talent. All of these elements are fundamental to the
successful delivery of our Accelerate strategy and to ensuring
Inchcape's sustainability for the long-term. Driving What Matters has four key
focus areas: Planet, People, Places and Practices. We made good
progress in each of these areas in FY 2023:
· Planet: We made steady progress
in reducing our Scope 1 and 2 CO2 emissions by 31%, and we remain
on track to meet our reduction target of 46% by 2030. In addition,
the Group's volume exposure to Electric Vehicles during the year
was stable at 2.4%;
· People: We made significant
progress with our People pillar. Key highlights include our
Inclusive Leadership Programme, which has successfully engaged over
650 leaders globally since 2021. Since that time, over 100 female
colleagues have graduated from our Women into Leadership
Programme;
· Places: We delivered over 30
programmes across our regions to improve road and driver safety,
improve mobility for people with disabilities, and provide
humanitarian and educational programmes; and
· Practices: During 2023 and
early 2024 we rolled out our enhanced Code of Conduct across our
global business. This includes over 4,000 new colleagues who have
joined the Group via acquisitions made over the last 18
months.
Distribution Excellence: extending our leadership in automotive distribution (new
vehicles and original parts)
In the Group's core operations, we
work with our mobility company partners in smaller, more complex
and harder-to-reach markets, which tend to be higher growth with
low motorisation rates. Our Distribution Excellence approach
connects the products of our mobility company partners with
consumers, supported by insights from our data analytics
platform.
This includes deciding which vehicle
models and parts to order, developing the pricing structure in a
market, arranging the importation of new vehicles and parts,
building the brand including marketing and the provision of finance
and insurance products, the creation and management of the digital
and physical network, in-market distribution of new vehicles and
parts for the aftermarket and, when we choose to operate
dealerships ourselves, we perform retail and aftersales services.
During FY 2023, we made further progress in this area through these
following areas of investment:
· Digital, Data & Analytics: We continued to invest in our
digital capabilities to drive performance and efficiency in our
markets. On DXP, our customer experience platform, we have
continued to develop and roll out an enhanced version of the
platform across our regions, with improved functionality. DAP,
which provides advanced analytics and machine learning, leverages
our data and drives smarter, faster and better business decisions.
By the end of FY 2023, we were running over 250 machine-learning
algorithms and over 100 non-AI statistical forecast models across a
range of markets.
· Acquisitions: In line with our
focus on markets with high growth potential, we further expanded
our distribution footprint by acquiring several independent
distribution businesses, across APAC in particular:
o CATS, expanding our APAC footprint with entry into the
Philippines with a range of brands
o Mercedes-Benz distribution business in Indonesia, further
building our presence in that market
o Great Lake Motor Distributors, which distributes SAIC's Maxus
brand in New Zealand
· Distribution contract
wins: We won 15 distribution
contracts with mobility company partners during the year, including
a global strategic partnership with Great Wall Motors. Building on
the Chinese mobility company partnerships through the acquisition
of Derco, Inchcape is now the leading independent distributor of
Chinese vehicles.
o Distribution contract wins with existing mobility company
partners in FY 2023 include BYD Commercial Vehicles in Singapore
and Belux; Geely in Guatemala, and El Salvador; Subaru in Bolivia
and Ecuador; Mercedes-Benz in Honduras; Great Wall in Indonesia;
and Changan in the Philippines and across a number of markets in
East Africa. Distribution contract wins in FY 2023 with new
mobility company partners for Inchcape included Tata in Thailand
and XCMG in Colombia and Peru.
To provide investors and analysts
with further understanding of the dynamics of the Distribution
commercial model, management will be hosting an "In The Driving Seat" webinar on Thursday 23
May 2024, at 2pm UK time. Access details for this event will
be published nearer the time.
Vehicle Lifecycle Services (VLS): capturing more lifetime value of vehicles
We continue to see the strategic
importance of VLS, with an opportunity for the Group to unlock
value in the subsequent phases of the vehicle's lifecycle, through
value-added services. VLS will drive enhancements to our core
Distribution business and initiatives, through capabilities which
include our Digital Parts Platform, a used car channel for our
independent dealers, further finance and insurance programmes and
warranty management.
· Digital Parts Platform: The platform in Australia continues to
gain traction, with an ambition to modernise the aftermarket parts
industry. We are further scaling this platform in Australia, with
12 distributors and 410 aftersales workshops now using the
platform, and several new mobility company partners signing up to
the platform. The platform is now live in Hong Kong and we are
planning further launches across other markets in APAC in FY
2024.
· Used
car excellence: We intend to further reduce the scale of bravoauto
to its profitable core, particularly given our continued strategic
focus on reducing our retail-only footprint. This will ensure a
more focused and tailored approach for bravoauto, as a value-added
service for our Distribution business, with a moderated operational
and geographic profile, supported by a continued disciplined
approach to investment. In light of our review of strategic options
for the UK retail business, we are re-evaluating our ambitions for
bravoauto as part of VLS.
VLS remains a strategic opportunity
for the Group but, particularly in light of reducing the scale of
bravoauto to its profitable core, we are re-evaluating the phasing
of our financial objectives for VLS.
Capital allocation
Supported by a strong balance
sheet, our capital allocation
policy remains unchanged: 1) to invest in the business for
future growth; 2) to make dividend payments; 3) to conduct
value-accretive acquisitions; and 4) in the absence of inorganic
opportunities, to consider share buybacks, as appropriate,
subject to the Group's leverage limit. In the
short term, the Group continues to focus on
deleveraging.
Our dividend policy targets a
40% annual payout ratio of
basic adjusted EPS, and as such our total dividend amounts to 33.9p
compared to 28.8p in 2022.
Investment proposition
Inchcape is the global leader in automotive
distribution, with a highly compelling offering for mobility
company partners, based on a differentiated, scaled and diversified
business model, which is asset-light and digitally-enabled.
With the Group's on-going investment in growth opportunities, in
particular through organic investment and acquisitions, Inchcape
will continue to build on its long track record of delivering
revenue and profit growth, high
levels of returns and strong free cash flow generation
through the cycle.
As evidence of this track record of delivery, the Group has
relationships with 60 mobility company partners and, during FY
2023, delivered 74% free cash flow conversion and ROCE of
26%.
Our investment case is underpinned
by consistent execution against
clear strategic objectives, combined with a disciplined approach to capital
allocation. These factors enable the Group to continue
delivering attractive returns for
shareholders.
Outlook
Future growth and operating margin
delivery at Inchcape will be driven by our market leadership,
resilient and cash generative business model, diversified
geographic footprint and digital-led approach and supported by
acquisitions and contract wins. The Group will also continue to
invest in digital capabilities to enhance customer loyalty and
drive margins.
FY 2024 is expected to be another
year of growth, albeit moderated, with the Group maintaining
prudent expectations for recovery in FY 2024 in certain markets,
which are weaker than previous years. To that end, the Group is
driving an even stronger focus on cost management to deliver a
moderated short term growth profile, in the context of broader
market dynamics.
Over the medium to long term, the
Group is expecting to return to higher levels of growth, compared
to FY 2024, with many markets, particularly in the Americas,
expected to recover from what are anticipated to be towards
historical lows in FY 2024. Medium to long term growth will be
supported by the Group's even stronger focus on cost
management.
Operating and financial
review
Distribution
Distribution reported revenue
of £9.1bn, increasing 55% year-on-year on a
reported basis, reflecting the contribution of acquisition as well
as organic growth, which was up 16%. The combination of an
excellent revenue performance and margin expansion of 70bps drove
adjusted operating profit1 of £629m (2022: £363m).
Adjusted operating margin1 rose 70bps to
6.9%.
|
2023
|
2022
|
% change reported
|
% change constant FX
|
% change
organic2
|
|
£m
|
£m
|
Revenue
|
|
|
|
|
|
APAC
|
2,826
|
2,341
|
+21%
|
+23%
|
+16%
|
Europe & Africa
|
2,521
|
2,048
|
+23%
|
+21%
|
+21%
|
Americas
|
3,746
|
1,480
|
+153%
|
+152%
|
+7%
|
Total Distribution
|
9,093
|
5,869
|
+55%
|
+55%
|
+16%
|
Adjusted operating
profit1
|
|
|
|
|
|
APAC
|
235
|
163
|
+44%
|
+47%
|
|
Europe & Africa
|
132
|
90
|
+47%
|
+47%
|
|
Americas
|
262
|
110
|
+138%
|
+137%
|
|
Total Distribution
|
629
|
363
|
+73%
|
+75%
|
|
Adjusted operating
margin1
|
|
|
|
|
|
APAC
|
8.3%
|
7.0%
|
+130bps
|
+130bps
|
|
Europe & Africa
|
5.2%
|
4.4%
|
+80bps
|
+90bps
|
|
Americas
|
7.0%
|
7.4%
|
(40)bps
|
(50)bps
|
|
Total Distribution
|
6.9%
|
6.2%
|
+70bps
|
+80bps
|
|
APAC revenue was up 21%
year-on-year, reflecting organic growth of 16% and contribution of
acquisitions. Adjusted operating profit1 rose 44%, with
an elevated adjusted operating margin of 8.3%. Excluding the impact
of property profits, operating margin was higher year-on-year at
7.7%. Our Asia
markets performed well, particularly Guam and Brunei. In Hong Kong, where the market continued
to show some signs of recovery, we delivered market share gains and
gained traction in certain segments where our brands perform
relatively well. This was supported by a healthy order bank and
further progress in diversifying our mobility company partner
portfolio, particularly in Electric Vehicles. In Singapore, vehicle licence availability
remained well below peak levels, but there were some encouraging
signs of licence availability towards the end of the year. In
Australasia, our strong
performance was driven by momentum in new vehicle volumes, with
market share gains achieved. This was partly due to improved supply
against a strong opening order bank. During Q3 2024, we made three
bolt-on distribution acquisitions in APAC (CATS in the Philippines,
Mercedes-Benz in Indonesia and Great Lake Motor Distributors in New
Zealand), which added an aggregate c.£400m in annualised revenue,
with these businesses starting to contribute in FY 2023.
Europe & Africa revenue was
up 23% year-on-year with adjusted operating profit1
rising 47%, with elevated levels of adjusted operating margin at
5.2%. In Europe,
accelerated supply and an order bank unwind helped to drive
top-line growth and margin performance. During the year, there were
particularly strong performances from Belux, Greece and Romania. The region's elevated order
bank reduced during the course of 2023, and new consumer demand
remains muted in a number of markets. Africa continues to be an exciting
long-term growth prospect for the Group and has performed well,
supported by a resilient aftermarket capability.
Americas revenue grew 153%
year-on-year, driven by the contribution from Derco and organic
growth of 7%. Adjusted operating profit1 grew 138%, with
adjusted operating margin of 7.0%. Despite challenges across the
year in certain markets, and further slowdown in a number of
markets in Q4 2023, we continued to gain market share and drive
growth in many markets across the region, supported by the benefit
of diversification. Our businesses in Peru, Bolivia, Uruguay, Ecuador, across Central America and in the Caribbean performed well during the
year, with market share gains in a number of these markets.
Industry volumes in Chile
and Colombia were
significantly reduced from the prior year but our businesses in
those markets remain resilient, with strong market share. We remain
confident about our prospects in the Americas over the medium to
long term, with our highly diversified geographic footprint and
product portfolio, and supported by the region's high GDP growth,
low motorisation rates.
Retail
Our Retail segment includes the
results of our UK and Poland franchise dealerships and our
bravoauto business in
these markets.
|
2023
|
2022
|
% change reported
|
% change constant FX
|
% change
organic2
|
|
£m
|
£m
|
Revenue
|
|
|
|
|
|
Total Retail
|
2,354
|
2,264
|
+4%
|
+3%
|
+3%
|
Adjusted operating
profit1
|
|
|
|
|
|
Total Retail
|
40
|
48
|
(17)%
|
(17)%
|
|
Adjusted operating
margin1
|
|
|
|
|
|
Total Retail
|
1.7%
|
2.1%
|
(40)bps
|
(40)bps
|
|
Retail delivered organic
revenue growth of 3% and adjusted operating profit1
declined (17)%, resulting in an adjusted operating margin of 1.7%.
Retail remained resilient, despite weaker consumer demand,
supported by new vehicle growth from a stronger fleet market and a
robust aftersales business. The reduction in operating profit
largely reflects a more normalised margin in used cars.
As previously announced, following
approaches from a number of interested parties, the Group is
reviewing strategic options for the UK Retail business, which
potentially could include a sale. This review remains at an early
stage and there can be no certainty that it will result in a
transaction. A further update on this review will be provided as
and when appropriate.
We note that the FCA has announced
a review into historical finance commission arrangements. We look
forward to the outcome of the FCA review and the clarity that this
will bring for customers, lenders and dealers.
1. Operating profit and operating
margin stated before adjusting items
2. Organic growth is defined as
revenue growth in operations that have been open for at least a
year at constant foreign exchange rates
Value drivers
We provide disclosure on the value
drivers behind our gross profit. This includes:
§
|
Gross profit attributable to
Vehicles: New Vehicles, Used Vehicles and the associated income
from finance and insurance products; and
|
§
|
Gross profit attributable to
Aftersales: Service and Parts
|
|
2023
|
2022
|
% change reported
|
% change constant FX
|
|
£m
|
£m
|
Gross Profit
|
|
|
|
|
Vehicles
|
1,391
|
883
|
+58%
|
+50%
|
Aftersales
|
548
|
442
|
+24%
|
+28%
|
Total
|
1,939
|
1,325
|
+46%
|
+43%
|
We operate across the automotive
value chain, and during the year we generated 28% of gross profit
through Aftersales (2022: 33%). This reflects greater gross profit
contribution from vehicles as volumes improved, the contribution of
acquisitions and higher vehicle gross margins.
Other financial items
Adjusting items: In the year,
we have reported a pre-tax charge of £89m (2022: £40m) in respect
of adjusting items. This was primarily driven by acquisition and
integration costs (£50m), the finance component of the deferred
dividend payment (£10m) and non-cash, non-operational losses
arising from the adoption of hyperinflation accounting relating to
Ethiopia (£29m). Further details can be found in note 3 of the
condensed financial statements.
Net financing costs: Adjusted
net finance costs increased to £168m (2022: £38m), primarily due to the shift in the Group's capital structure
from Net Cash to a Net Debt profile over the last 12 months,
following the acquisition of Derco, and a higher
interest rate environment. Reported net finance costs were
£207m (2022: £67m), as they included the finance component of the
deferred dividend payment (£10m) and non-cash, non-operational
losses arising from the adoption of hyperinflation accounting
relating to Ethiopia (£29m).
Tax: The effective tax rate on
adjusted profit is 27.9% (2022: 26.0%), within the Group's guidance
range of between 27% and 28%, and on a statutory basis is 31.5%
(2022: 29.4%). The effective tax rate on adjusted profit continues
to be higher than the weighted average tax rate (22.4%) due
primarily to the impact of unrecognised deferred tax assets across
the group, principally in the UK and Americas.
Non-controlling interests: Profits attributable to our non-controlling interests
increased to £13m (2022: £5m). Non-controlling interests now
include a 40% holding in the CATS Group of Companies in the
Philippines and a 30% holding in the Mercedes-Benz distribution
business in Indonesia following their acquisition by the Group
during the year. Other significant non-controlling interests
include a 30% share in NBT Brunei and a 10% share of Subaru
Australia.
Dividend: The Board has
proposed a final ordinary dividend of 24.3p, which is subject to
the approval of shareholders at the 2024 Annual General meeting,
and if approved will be paid in June 2024. This follows an interim
dividend of 9.6p, and takes the total dividend in respect of FY
2023 to 33.9p. The Dividend Reinvestment Plan is available to
ordinary shareholders and the final date for receipt of elections
to participate is 24 May 2024.
Capital expenditure: During
2023, the Group incurred net capital expenditure of £62m (2022:
£58m), consisting of £93m of capital expenditure (2022: £68m) and
£31m of proceeds from the disposal of property, plant and equipment
(2022: £10m).
Financing: As at 31 December
2023, the funding structure of the Group is comprised of a
committed syndicated revolving credit facility of £900m (2022:
£700m), sterling Private Placement Loan Notes totalling £210m
(2022: £210m), a 5-year bond of £350m, at a fixed coupon of 6.5%, a
term facility of £250m (2022: £250m) and debt remaining outstanding
from acquisitions (including prior year acquisitions) of £80m
(2022: £617m). As at 31 December 2023, £150m of the syndicated
revolving credit facility was drawn (2022: undrawn). For our
corporate debt, excluding our Revolving Credit Facility, around 70%
is at fixed rates and over 50% has a maturity of at least 3 years.
The Group remains well within its debt covenants.
Pensions: As at 31 December
2023, the IAS 19 net post-retirement surplus was £67m (2022:
£93m), with the decrease driven largely by
lower than expected returns on scheme assets and movements in
corporate bond yields affecting the discount rate assumption used
to determine the value of scheme liabilities. In line with the
funding programme agreed with the Trustees, the Group made
additional cash contributions to the UK pension schemes of £2m
(2022: £3m). In addition, the Group acquired post-retirement
liabilities of £11m as a result of the acquisitions in the
year.
Acquisitions: During the year
the Group continued to further expand its distribution footprint,
completing three acquisitions during the year, amounting to net
acquisition outflows of £146m, with £23m of additional debt
acquired (excluding lease liabilities).
RISKS
PRINCIPAL BUSINESS RISKS
The Board has reassessed the
principal business risks which could impact the performance of the
Group. These include:
Tier 1:
§
|
Cybersecurity incident;
|
§
|
EV transition risks;
|
§
|
Margin pressure (changing route to
market, incentives);
|
§
|
Macro-economic conditions (cost
inflation, economic slowdown);
|
§
|
HSE: Health, safety or
environmental incident; and
|
§
|
Political risks/social
unrest;
|
Tier 2:
§
|
Acquisition ROI;
|
§
|
Business interruption (pandemic,
natural hazards);
|
§
|
Derco integration;
|
§
|
Financial reporting,
fraud;
|
§
|
Foreign exchange volatility; HSE:
Health, safety or environmental incident;
|
§
|
Legal/regulatory
compliance;
|
§
|
Loss of Distribution
contract
|
§
|
Loss of technology systems
(non-cyber);
|
§
|
New market entrants: business
models or technology;
|
§
|
People engagement and
rentention;
|
§
|
People future skills;
|
§
|
Supply chain disruption;
and
|
§
|
Strategy delivery and
transformation.
|
|
|
The materialisation of these risks
could have an adverse effect on the Group's results or financial
condition. If more than one of these risks occur, the combined
overall effect of such events may be compounded. The Group faces
many other risks which, although important and subject to regular
review, have been assessed as less significant and are not listed
here. These include, for example, natural catastrophe and business
interruption risks and certain financial risks.
The Group has defined and
implemented systems of risk management and internal control
designed to address these risks. These systems can offer
reasonable, but not absolute assurance, regarding the management of
these risks to an acceptable level. In particular, the
effectiveness of these systems may change over time, for example
with acquisitions or disposals or as the business implements major
change programmes. The effectiveness of these systems are reviewed
annually by the Audit Committee and improvements are made as
required.
APPENDIX - REGIONAL BUSINESS
MODELS
DISTRIBUTION
Americas
|
|
Country
|
Brands
|
Argentina
|
Subaru, Suzuki
|
Barbados1
|
Chrysler, Daimler Trucks, Dodge,
Freightliner, Fuso, Isuzu, JCB, Jeep, John Deere, Mercedes-Benz,
Mitsubishi, Subaru, Suzuki, Western Star
|
Bolivia
|
Changan, Chevrolet, JAC Motors,
Komatsu, Mazda, Renault, Still, Subaru, Suzuki
|
Chile
|
BMW, BMW Motorrad, DFSK, Changan,
Geely, Great Wall, Hangcha, Haval, Hino, JAC Motors, Jaguar, JCB,
Komatsu, Land Rover, Landini, Massey Ferguson, Mazda, MINI,
Porsche, Renault, Rolls Royce, Still, Subaru, Suzuki,
Volvo
|
Colombia
|
Citroen, Develon, DFSK, Dieci,
Doosan, DS Automobiles, Hangcha, Hino, Jaguar, Komatsu, Land Rover,
Liebher, Linde, Mack, Mercedes-Benz, Still, Subaru, Suzuki,
XCMG
|
Costa Rica
|
Changan, JAC, Suzuki
|
Ecuador
|
Freightliner, Geely, Mercedes-Benz,
Subaru, Western Star
|
El Salvador
|
Freightliner, Geely, Mercedes-Benz,
Western Star
|
Guatemala
|
Freightliner, Geely, Mercedes-Benz,
Western Star
|
Honduras
|
Freightliner, Geely, Mercedes-Benz,
Western Star
|
Panama
|
Suzuki
|
Peru
|
BMW, BMW Motorrad, Changan,
Citroen, DFSK, Great Wall, Haval, Hino, JAC Motors, Komatsu, Mazda,
MINI, Renault, Still, Subaru, Suzuki, XCMG
|
Uruguay
|
Freightliner, Fuso,
Mercedes-Benz
|
1. Distribution agreements
for these brands across a range of Caribbean islands, centred on
Barbados
APAC
|
|
Country
|
Brands
|
Brunei
|
Lexus, Toyota
|
Guam2
|
BMW, Chevrolet, Lexus, Toyota,
Morrico heavy equipment3
|
Hong Kong
|
Hino, Jaguar, Land Rover, Lexus,
Maxus, ORA, Toyota
|
Indonesia
|
Great Wall, Harley Davidson,
Jaguar, Land Rover, Mercedes-Benz
|
Macau
|
Hino, Jaguar, Land Rover, Lexus,
ORA, Toyota
|
Saipan
|
Toyota, Lexus
|
Singapore
|
BYD Commercial Vehicles, Hino,
Lexus, Suzuki, Toyota
|
Philippines
|
Changan, Harley Davidson, Jaguar,
Land Rover, Mazda, Mercedes-Benz, Ram
|
Thailand
|
Jaguar, Land Rover, Tata
Motors
|
Australia
|
Citroen, Peugeot, Subaru
|
New Zealand
|
Maxus, Subaru
|
Europe &
Africa
|
|
Country
|
Brands
|
Belgium
|
BYD, BYD Commercial Vehicles,
Lexus, Toyota
|
Bulgaria
|
Lexus, Toyota
|
Estonia
|
BMW, BMW Motorrad, Jaguar, Land
Rover, Mazda, MINI
|
Finland
|
Jaguar, Land Rover,
Mazda
|
Greece
|
Lexus, Toyota
|
Latvia
|
BMW, BMW Motorrad, Ford, Jaguar,
Land Rover, Mazda, MINI
|
Lithuania
|
BMW, BMW Motorrad, Ford, Jaguar,
Land Rover, Mazda, MINI
|
Luxembourg
|
BYD, Lexus, Toyota
|
North Macedonia
|
Lexus, Toyota
|
Poland
|
Jaguar, Land Rover
|
Romania
|
Lexus, Toyota
|
Djibouti
|
BMW, Changan, Komatsu,
Toyota
|
Ethiopia
|
Hino, Komatsu, New Holland, Suzuki,
Toyota
|
Kenya
|
BMW, BMW Motorrad, Changan, Jaguar,
Land Rover
|
Tanzania
|
Changan
|
2. Distribution agreements
for these brands across a range of Pacific islands, centred on
Guam
3. Morrico heavy equipment - Bomag,
CNHI International SA, Cummins, Daimler, Detroit Diesel
International Direct, Dieci, DTNA , EL Industries, Fuso, Haulotte,
Hyundai, Kohler, Load King, New Holland, Rosenbauer, Schwarze,
Sullivan Palatek, Vac Con, WanCo
RETAIL
|
|
Country
|
Brands
|
Australia4
|
Isuzu Ute, Jeep, Kia, Mitsubishi,
Volkswagen
|
Poland
|
BMW, BMW Motorrad, MINI
|
UK
|
Audi, BMW, Jaguar, Land Rover,
Lexus, Mercedes-Benz, MINI, Porsche, Smart,
Toyota, Volkswagen
|
4. Following scale disposal of
retail businesses in Australia, no longer disclosed within
Retail
Consolidated income statement
For the year ended 31 December 2023
|
Continuing operations
|
Notes
|
2023
£m
|
2022
£m
|
|
|
Revenue
|
2
|
11,447
|
8,133
|
|
|
Cost of sales
|
|
(9,508)
|
(6,808)
|
|
|
Gross profit
|
|
1,939
|
1,325
|
|
|
Net operating expenses
|
|
(1,320)
|
(925)
|
|
|
Operating profit
|
2
|
619
|
400
|
|
|
Share of profit after tax of joint ventures and
associates
|
|
1
|
-
|
|
|
Profit before finance and tax
|
|
620
|
400
|
|
|
Finance income
|
4
|
52
|
21
|
|
|
Finance costs
|
4
|
(259)
|
(88)
|
|
|
Profit before tax from continuing
operations
|
|
413
|
333
|
|
|
Tax
|
5
|
(130)
|
(98)
|
|
|
Profit for the year from continuing
operations
|
|
283
|
235
|
|
|
Loss from discontinued operations
|
9(c)
|
-
|
(241)
|
|
|
Total profit/(loss) for the year
|
|
283
|
(6)
|
|
|
|
|
|
|
|
|
Profit/(loss) attributable to:
|
|
|
|
|
|
Owners of the parent
|
|
270
|
(11)
|
|
|
Non-controlling interests
|
|
13
|
5
|
|
|
|
|
283
|
(6)
|
|
|
|
|
|
|
|
|
Earnings per share from continuing operations
attributable to the owners
of the parent
|
6
|
|
|
|
|
Basic earnings per share (pence)
|
|
65.6p
|
61.1p
|
|
|
Diluted earnings per share (pence)
|
|
64.8p
|
54.6p
|
|
|
Earnings/(loss) per share attributable to the
owners of the parent
|
6
|
|
|
|
|
Basic earnings/(loss) per share
(pence)
|
|
65.6p
|
(2.9)p
|
|
|
Diluted earnings/(loss) per share
(pence)
|
|
64.8p
|
(2.5)p
|
|
|
|
|
|
|
|
|
Alternative performance measures:
|
|
|
|
|
|
Operating profit from continuing
operations
|
|
619
|
400
|
|
|
Adjusting items within net operating
expenses:
|
3
|
50
|
11
|
|
|
Acquisition and integration costs
|
|
50
|
42
|
|
|
Disposal of businesses
|
|
-
|
(14)
|
|
|
Accelerated amortisation and net impairment
reversals
|
|
-
|
3
|
|
|
Gain on pension indexation
|
|
-
|
(20)
|
|
|
Adjusted operating profit from continuing
operations
|
|
669
|
411
|
|
|
Share of profit after tax of joint ventures and
associates
|
|
1
|
-
|
|
|
Adjusted profit before finance costs and tax
from continuing operations
|
|
670
|
411
|
|
|
Net finance costs
|
|
(207)
|
(67)
|
|
|
Adjusting items within net finance
costs:
|
3
|
39
|
29
|
|
|
Net monetary loss on hyperinflation
|
|
29
|
29
|
|
|
Interest on dividend payments to former
shareholders of Derco
|
|
10
|
-
|
|
|
Adjusted profit before tax from continuing
operations
|
|
502
|
373
|
|
|
Tax on adjusted profit
|
|
(140)
|
(97)
|
|
|
Adjusted profit after tax from continuing
operations
|
|
362
|
276
|
|
|
|
|
|
|
|
|
Adjusted earnings per share from continuing
operations
|
6
|
|
|
|
|
Basic adjusted earnings per share
|
|
84.8p
|
72.0p
|
|
|
Diluted adjusted earnings per share
|
|
83.7p
|
64.4p
|
|
Consolidated statement of comprehensive
income
For the year ended 31 December 2023
|
Notes
|
2023
£m
|
2022
£m
|
Profit/(loss) for the year
|
|
283
|
(6)
|
Other comprehensive income/(loss):
|
|
|
|
Items that will not be reclassified to the
consolidated income statement
|
|
|
|
Retirement benefit schemes
|
|
|
|
- net actuarial losses
|
|
(20)
|
(12)
|
- deferred tax on actuarial losses
|
|
-
|
-
|
|
|
(20)
|
(12)
|
Items that may be or have been reclassified
subsequently to the consolidated income statement
|
|
|
|
Cash flow hedges
|
|
|
|
- net fair value (losses)/gains
|
|
(48)
|
9
|
- tax on cash flow
hedges1
|
|
17
|
(7)
|
Investments held at fair value
|
|
|
|
- net fair value losses
|
|
(3)
|
(2)
|
Deferred tax on taxation losses
|
|
(1)
|
-
|
Foreign currency translation
|
|
|
|
- exchange differences on translation of
foreign operations
|
|
(133)
|
133
|
- exchange differences on translation of
discontinued operations
|
9(b)
|
-
|
19
|
- recycling of foreign currency
reserve
|
|
(1)
|
99
|
Adjustments for hyperinflation
|
|
36
|
49
|
|
|
(133)
|
300
|
Other comprehensive (loss)/income for the
year
|
|
(153)
|
288
|
Total comprehensive income for the
year
|
|
130
|
282
|
|
|
|
|
Total comprehensive income attributable
to:
|
|
|
|
- Owners of the parent
|
|
120
|
271
|
- Non-controlling interests
|
|
10
|
11
|
|
|
130
|
282
|
Total comprehensive income/(loss) arising
from:
|
|
|
- Continuing operations
|
|
130
|
405
|
- Discontinued operations
|
|
-
|
(123)
|
1. Taxation in
other comprehensive income in respect of cashflow hedges is
comprised of a deferred tax credit of £18m (2022: charge of £9m)
offset by a current tax charge of £1m (2022: credit of
£2m).
Consolidated statement of financial
position
As at 31 December 2023
|
Notes
|
2023
£m
|
2022
£m
|
Non-current assets
|
|
|
|
Intangible assets
|
|
1,271
|
1,174
|
Property, plant and equipment
|
|
893
|
737
|
Right-of-use assets
|
|
364
|
419
|
Investments in joint ventures and
associates
|
|
21
|
22
|
Financial assets at fair value through other
comprehensive income
|
|
1
|
3
|
Derivative financial instruments
|
|
1
|
17
|
Trade and other receivables
|
|
49
|
54
|
Deferred tax assets
|
|
105
|
80
|
Retirement benefit asset
|
|
84
|
104
|
|
|
2,789
|
2,610
|
Current assets
|
|
|
|
Inventories
|
|
2,718
|
2,376
|
Trade and other receivables
|
|
835
|
817
|
Derivative financial instruments
|
|
38
|
37
|
Current tax assets
|
|
56
|
41
|
Cash and cash equivalents
|
8(b)
|
689
|
1,064
|
Assets held for sale
|
|
14
|
19
|
|
|
4,350
|
4,354
|
Total assets
|
|
7,139
|
6,964
|
Current liabilities
|
|
|
|
Trade and other payables
|
|
(3,150)
|
(2,898)
|
Derivative financial instruments
|
|
(88)
|
(39)
|
Current tax liabilities
|
|
(81)
|
(88)
|
Provisions
|
|
(69)
|
(57)
|
Lease liabilities
|
|
(81)
|
(83)
|
Borrowings
|
|
(652)
|
(546)
|
|
|
(4,121)
|
(3,711)
|
Non-current liabilities
|
|
|
|
Trade and other payables
|
|
(69)
|
(60)
|
Provisions
|
|
(39)
|
(47)
|
Derivative financial instruments
|
|
(9)
|
(1)
|
Deferred tax liabilities
|
|
(267)
|
(255)
|
Lease liabilities
|
|
(359)
|
(416)
|
Borrowings
|
|
(638)
|
(896)
|
Retirement benefit liability
|
|
(17)
|
(11)
|
|
|
(1,398)
|
(1,686)
|
Total liabilities
|
|
(5,519)
|
(5,397)
|
Net assets
|
|
1,620
|
1,567
|
Equity
|
|
|
|
Share capital
|
|
42
|
38
|
Share premium
|
|
147
|
147
|
Capital redemption reserve
|
|
143
|
143
|
Merger reserve
|
|
312
|
316
|
Other reserves
|
|
(63)
|
69
|
Retained earnings
|
|
940
|
820
|
Equity attributable to owners of the
parent
|
|
1,521
|
1,533
|
Non-controlling interests
|
|
99
|
34
|
Total equity
|
|
1,620
|
1,567
|
DUNCAN
TAIT
ADRIAN
LEWIS
GROUP CHIEF EXECUTIVE
GROUP CHIEF FINANCIAL OFFICER
Consolidated statement of changes in
equity
For the year ended 31 December 2023
|
Notes
|
Share
capital
£m
|
Share
Premium
£m
|
Capital redemption reserve
£m
|
Merger
reserve
£m
|
Other
reserves
£m
|
Retained earnings
£m
|
Total
equity attributable to owners of the parent
£m
|
Non-controlling interests
£m
|
Total shareholders' equity
£m
|
At 1 January 2022
|
|
39
|
147
|
142
|
-
|
(228)
|
1,009
|
1,109
|
22
|
1,131
|
(Loss)/profit for the year
|
|
-
|
-
|
-
|
-
|
-
|
(11)
|
(11)
|
5
|
(6)
|
Other comprehensive income/(loss) for the
year
|
|
-
|
-
|
-
|
-
|
294
|
(12)
|
282
|
6
|
288
|
Total comprehensive income/(loss) for the
year
|
|
-
|
-
|
-
|
-
|
294
|
(23)
|
271
|
11
|
282
|
Hedging gains and losses transferred to
inventory
|
|
-
|
-
|
-
|
-
|
3
|
-
|
3
|
-
|
3
|
Written put option
|
|
-
|
-
|
-
|
-
|
-
|
(13)
|
(13)
|
-
|
(13)
|
Shares to be issued
|
|
-
|
-
|
-
|
316
|
-
|
-
|
316
|
-
|
316
|
Non-controlling interests on acquisition of
subsidiaries
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
5
|
5
|
Share-based payments, net of tax
|
|
-
|
-
|
-
|
-
|
-
|
10
|
10
|
-
|
10
|
Share buyback programme
|
|
(1)
|
-
|
1
|
-
|
-
|
(70)
|
(70)
|
-
|
(70)
|
Purchase of own shares by the Inchcape Employee
Trust
|
|
-
|
-
|
-
|
-
|
-
|
(4)
|
(4)
|
-
|
(4)
|
Dividends:
|
|
|
|
|
|
|
|
|
|
|
- Owners of the parent
|
7
|
-
|
-
|
-
|
-
|
-
|
(89)
|
(89)
|
-
|
(89)
|
- Non-controlling interests
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(4)
|
(4)
|
At 1 January 2023
|
|
38
|
147
|
143
|
316
|
69
|
820
|
1,533
|
34
|
1,567
|
Profit for the year
|
|
-
|
-
|
-
|
-
|
-
|
270
|
270
|
13
|
283
|
Other comprehensive (loss)/income for the
year
|
|
-
|
-
|
-
|
-
|
(130)
|
(20)
|
(150)
|
(3)
|
(153)
|
Total comprehensive income/(loss) for the
year
|
|
-
|
-
|
-
|
-
|
(130)
|
250
|
120
|
10
|
130
|
Hedging gains and losses transferred to
inventory
|
|
-
|
-
|
-
|
-
|
(2)
|
-
|
(2)
|
-
|
(2)
|
Written put option
|
9(b)
|
-
|
-
|
-
|
-
|
-
|
(1)
|
(1)
|
-
|
(1)
|
Shares issued
|
|
4
|
-
|
-
|
(4)
|
-
|
-
|
-
|
-
|
-
|
Acquisition of non-controlling
interests
|
9(b)
|
-
|
-
|
-
|
-
|
-
|
3
|
3
|
(3)
|
-
|
Non-controlling interests on acquisition of
subsidiaries
|
9(a)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
64
|
64
|
Share-based payments, net of tax
|
|
-
|
-
|
-
|
-
|
-
|
15
|
15
|
-
|
15
|
Purchase of own shares by the Inchcape Employee
Trust
|
|
-
|
-
|
-
|
-
|
-
|
(19)
|
(19)
|
-
|
(19)
|
Dividends:
|
|
|
|
|
|
|
|
|
|
|
- Owners of the parent
|
7
|
-
|
-
|
-
|
-
|
-
|
(128)
|
(128)
|
-
|
(128)
|
- Non-controlling interests
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(6)
|
(6)
|
At 31 December 2023
|
|
42
|
147
|
143
|
312
|
(63)
|
940
|
1,521
|
99
|
1,620
|
Share-based payments include a net tax credit
of £nil (2022: net tax credit of £nil).
Consolidated
statement of cash flows
For the year ended
31 December 2023
|
Notes
|
2023
£m
|
2022
£m
|
Cash generated from operating
activities
|
|
|
|
Cash generated from operations
|
8(a)
|
900
|
619
|
Tax paid
|
|
(156)
|
(95)
|
Interest received
|
|
46
|
17
|
Interest paid
|
|
(197)
|
(47)
|
Net cash generated from operating
activities
|
|
593
|
494
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
Acquisition of businesses, net of cash and
overdrafts acquired
|
9(a)
|
(137)
|
(395)
|
Net cash inflow/(outflow) from sale of
businesses
|
|
1
|
(17)
|
Proceeds from disposal of investments in joint
ventures and associates
|
|
2
|
-
|
Purchase of investments in joint ventures and
associates
|
|
(3)
|
(6)
|
Purchase of property, plant and
equipment
|
|
(88)
|
(64)
|
Purchase of intangible assets
|
|
(5)
|
(4)
|
Proceeds from disposal of property, plant and
equipment
|
|
31
|
10
|
Dividends received from joint ventures and
associates
|
|
1
|
-
|
Payments made before the commencement date of a
lease
|
|
-
|
(1)
|
Receipt from finance sub-lease
receivables
|
|
3
|
2
|
Net cash used in investing
activities
|
|
(195)
|
(475)
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
Share buyback programme
|
|
-
|
(70)
|
Purchase of own shares by the Inchcape Employee
Trust
|
|
(19)
|
(4)
|
Cash (outflow)/inflow from acquisition
financing bridge facility
|
|
(350)
|
600
|
Cash inflow from revolving credit
facility
|
|
150
|
-
|
Cash inflow from bond issuance
|
|
348
|
-
|
Cash outflow from other borrowings
|
|
(560)
|
(4)
|
Payment of capital element of lease
liabilities
|
|
(87)
|
(63)
|
Payments to former shareholders of Derco
group
|
|
(267)
|
-
|
Equity dividends paid
|
7
|
(128)
|
(89)
|
Acquisition of non-controlling
interests
|
|
(15)
|
-
|
Dividends paid to non-controlling
interests
|
|
(6)
|
(4)
|
Net cash (used in)/generated from financing
activities
|
|
(934)
|
366
|
|
|
|
|
Net (decrease)/increase in cash and cash
equivalents
|
8(b)
|
(536)
|
385
|
Cash and cash equivalents at beginning of the
year
|
|
1,050
|
589
|
Effect of foreign exchange rate
changes
|
|
(74)
|
76
|
Cash and cash equivalents at the end of the
year
|
|
440
|
1,050
|
|
|
|
|
Cash and cash equivalents consist
of:
|
|
|
|
- Cash at bank and cash equivalents
|
|
610
|
641
|
- Short-term deposits
|
|
79
|
423
|
- Bank overdrafts
|
|
(249)
|
(14)
|
|
|
440
|
1,050
|
NOTES TO THE FINANCIAL
STATEMENTS
1 Basis of preparation and accounting
policies
The Group consolidated financial statements have
been prepared in accordance with UK-adopted International Financial
Reporting Standards (IFRS) and the Companies Act 2006 applicable to
companies reporting under IFRS.
The condensed set of financial information
presented for the years ended 31 December 2023 and 2022 do not
constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006. The financial information for the year
ended 31 December 2022 is derived from the statutory accounts for
that year which have been delivered to the Registrar of Companies.
The report of the auditors on those accounts was unqualified, did
not draw attention to any matters by way of emphasis and did not
contain a statement under s498(2) or (3) of the Companies Act 2006.
The financial information for the year ended 31 December 2023 and
the comparative information have been extracted from the audited
consolidated financial statements for the year ended 31 December
2023 prepared under IFRS, which have not yet been approved by the
shareholders and have not yet been delivered to the Registrar. The
report of the auditors on the consolidated financial statements for
2023 was unqualified and did not contain a statement under Section
498 (2) or (3) of the Companies Act 2006.
Accounting policies
The condensed set of consolidated financial
information has been prepared using accounting policies consistent
with those in the Group's Annual Report and Accounts 2022 with the
exception of the following standards, amendments and
interpretations which have been newly adopted from 1 January
2023:
Newly adopted accounting standards
From 1 January 2023, the following standards
become effective in the Group's consolidated financial
statements:
· IFRS 17
Insurance Contracts;
· Amendments to
IFRS 17 Insurance Contracts: Initial Application of IFRS 17 and
IFRS 9 Comparative Information;
· Amendments to
IAS 12 relating to Deferred tax related to assets and
liabilities arising from a single transaction;
· Amendments to
IFRS 4 when applying IFRS 9 Financial Instruments;
· Amendments to
IAS 1 Presentation of Financial Instruments, classification of
liabilities as current or non-current; and
· Amendments to
IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors: Definition of Accounting Estimates.
The adoption of the standards and
interpretations listed above has not led to any material impact on
the financial position or performance of the Group.
The Group has not early adopted other standards,
amendments to standards or interpretations that have been issued
but are not yet effective.
Designation of Ethiopia as a hyperinflationary
economy
The Group financial statements include
adjustments for hyperinflation, following the application of IAS 29
Financial Reporting in Hyperinflationary Economies in relation
to the Group's operations with a functional currency
of Ethiopian Birr.
The Group's consolidated financial statements
include the results and financial position of its Ethiopian
operations restated to the purchasing power or inflationary
measuring unit current at the end of the year, leading to a
hyperinflationary loss in respect of monetary items being
reported in finance costs, and treated as an adjusting item. The
results of the Group's Ethiopian operations have been translated at
the closing exchange rate, as required by IAS 21 The Effects
of Changes in Foreign Exchange Rates for hyperinflationary
foreign operations.
Whilst IAS 29 Financial Reporting in
Hyperinflationary Economies is applied in individual financial
statements as though the relevant economy was always
hyperinflationary, comparative amounts are not restated in
consolidated amounts already presented in a stable currency. The
resulting difference in the opening Ethiopian net assets has been
presented as a translation adjustment in other comprehensive
income.
The inflationary factors used by the Group are
the official price indices published by the Central Statistical
Agency of Ethiopia. Hyperinflationary adjustments have been
calculated using the price index prevailing at 31 December 2023,
which was a CPI index of 425.1 (31 December 2022:
CPI index 328.9). The adjusted results and financial position
of Ethiopia were translated at the year-end closing rate before
being included in the Group's consolidated financial
statements.
1 Basis of preparation and accounting policies
continued
Going concern
Based on the Group's cash flow forecasts and
projections, the Board is satisfied that the Group will operate
within the level of its committed facilities for the foreseeable
future. For this reason, the Board continues to adopt the going
concern basis in preparing its financial statements. In making
this assessment, the Group has considered available liquidity in
relation to net debt and committed facilities, the Group's latest
forecasts for 2024 and 2025 cash flows, together with adjusted
scenarios.
Committed bank facilities and Private Placement
borrowings amount to £1,360m, of which £610m was drawn at 31
December 2023. In June 2023, the Group issued a £350m bond offering
with a coupon of 6.5%, due to mature in June 2028 and in December
2023, the Group's Revolving Credit Facility was amended, increasing
the facility limit to £900m and extending the maturity date to
December 2028.
The Private Placement Loan notes (of which £70m
is due to mature in May 2024) and the Term Loan (due to mature
in December 2024) are subject to the same interest cover covenant
based on an adjusted EBITA measure to interest on consolidated
borrowings measured on a trailing 12-month basis at June and
December.
The latest Group forecasts for 2024 and 2025
indicate that the Group is expected to be compliant with this
covenant throughout the forecast period and have sufficient
liquidity to continue operating throughout that period.
A range of sensitivities has been applied to the
forecasts to assess the Group's compliance with its covenant
requirements over the forecast period. These sensitivities
included:
· a 12-month
reduction in New and Used revenue from July 2024, resulting from
decreasing consumer demand in response to fiscal tightening
and resulting economic downturns;
· a reduction in
reported GBP earnings from July to December 2024 resulting from the
strengthening of the sterling relative to other
currencies;
· a general
liquidity reduction impacting working capital from January
2025;
· with no
mitigating actions applied in relation to the sensitivities
described above.
In a scenario where all of the above
sensitivities occur at the same time, with the interest cover
covenant measured on a trailing 12-month basis, the sensitised
forecasts indicate that the Group is not expected to breach any
covenants and would be compliant with the interest cover
requirements throughout the forecast period. Additionally, under
these circumstances, the Group expects to have sufficient
funds to meet cash flow requirements.
A reverse stress test scenario analysis
concluded that a set of circumstances in which the Group would
breach its covenant or have insufficient funds to meet cash flow
requirements are considered to be remote, relative to the
sensitivities referred to above.
Therefore, the Board concluded that the Group
will be able to operate within the level of its committed
facilities for the foreseeable future. The Directors
consider it appropriate to adopt the going concern basis of
accounting in preparing the financial statements for the year
ending 31 December 2023.
2 Segmental analysis
The Group has four reportable segments which
have been identified based on the operating segments of the Group
that are regularly reviewed by the chief operating decision-maker,
which has been determined to be the Executive Committee, in order
to assess performance and allocate resources. A reassessment of the
Group's operating segments was conducted following the acquisition
of the Derco group in 2022. The Group's operating segments are now
represented by groups of countries which comprise the UK, Asia,
Australasia, Europe, Africa, and the Americas, and the market
channels, Distribution and Retail. Operating segments are then
aggregated into reporting segments to combine those with similar
economic characteristics. The reassessment of the Group's operating
segments did not result in a change to the reporting
segments.
The Group reports the performance of its
reporting segments after the allocation of central costs. These
represent costs of Group functions.
The following summary describes the operations
of each of the Group's reportable segments:
Distribution
|
APAC
Europe & Africa
Americas
|
Exclusive distribution, sales and marketing
activities of New Vehicles and Parts.
Sale of New and Used Vehicles together with
logistics services where the Group may also be the exclusive
distributor, alongside associated Aftersales activities
of service, body shop repairs and parts sales.
|
Retail
|
|
Sale of New and Used Vehicles, together with
associated Aftersales activities of service, body shop repairs
and parts sales in the UK and Europe.
|
|
Distribution
|
|
|
|
2023
|
APAC
£m
|
Europe &
Africa
£m
|
Americas
£m
|
Total Distribution
£m
|
|
Retail
£m
|
Total
£m
|
Revenue
|
|
|
|
|
|
|
|
Total revenue
|
2,826
|
2,521
|
3,746
|
9,093
|
|
2,354
|
11,447
|
Results
|
|
|
|
|
|
|
|
Adjusted operating profit
|
235
|
132
|
262
|
629
|
|
40
|
669
|
Operating adjusting items
|
|
|
|
|
|
|
(50)
|
Operating profit from continuing
operations
|
|
|
|
|
|
|
619
|
Share of profit after tax of joint ventures and
associates
|
|
|
|
|
|
|
1
|
Profit before finance and tax
|
|
|
|
|
|
|
620
|
Finance income
|
|
|
|
|
|
|
52
|
Finance costs
|
|
|
|
|
|
|
(259)
|
Profit before tax from continuing
operations
|
|
|
|
|
|
|
413
|
Tax
|
|
|
|
|
|
|
(130)
|
Profit for the year from continuing
operations
|
|
|
|
|
|
|
283
|
The Group's reported segments are based on the
location of the Group's assets. Revenue earned from sales is
disclosed by origin and is not materially different from revenue by
destination. Revenue is further analysed as follows:
2023
|
£m
|
UK
|
2,065
|
Chile
|
1,773
|
Australia
|
1,310
|
Rest of the world
|
6,299
|
Group
|
11,447
|
The Group's non-current assets by location
comprise intangible assets, property, plant and equipment,
right-of-use assets, investments in joint ventures and associates,
and are analysed as follows:
2023
|
£m
|
UK
|
297
|
Rest of the world
|
2,252
|
Group
|
2,549
|
2 Segmental analysis continued
|
Distribution
|
|
|
|
2023
|
APAC
£m
|
Europe &
Africa
£m
|
Americas
£m
|
Total
Distribution
£m
|
|
Retail
£m
|
Total
£m
|
Segment assets and liabilities
|
|
|
|
|
|
|
|
Segment assets
|
915
|
748
|
1,454
|
3,117
|
|
485
|
3,602
|
Other current assets
|
|
|
|
|
|
|
795
|
Other non-current assets
|
|
|
|
|
|
|
2,742
|
Segment liabilities
|
(1,269)
|
(741)
|
(830)
|
(2,840)
|
|
(495)
|
(3,335)
|
Other liabilities
|
|
|
|
|
|
|
(2,184)
|
Total net assets
|
|
|
|
|
|
|
1,620
|
Segment assets include net inventory,
receivables, and derivative assets. Segment liabilities include
payables, provisions, and derivative liabilities.
|
Distribution
|
|
|
|
2023 from
continuing operations
|
APAC
£m
|
Europe &
Africa
£m
|
Americas
£m
|
Total Distribution
£m
|
|
Retail
£m
|
Total
£m
|
Other segment
items
|
|
|
|
|
|
|
|
Capital expenditure:
|
|
|
|
|
|
|
|
- Property, plant and equipment
|
27
|
13
|
27
|
67
|
|
21
|
88
|
- Leased vehicles, rental machinery and
equipment
|
20
|
26
|
15
|
61
|
|
23
|
84
|
- Right-of-use assets
|
12
|
7
|
14
|
33
|
|
3
|
36
|
- Intangible assets
|
1
|
1
|
2
|
4
|
|
1
|
5
|
Depreciation and impairment:
|
|
|
|
|
|
|
|
- Property, plant and equipment
|
11
|
7
|
20
|
38
|
|
23
|
61
|
- Leased vehicles, rental machinery and
equipment
|
6
|
1
|
13
|
20
|
|
-
|
20
|
- Right-of-use assets
|
30
|
8
|
35
|
73
|
|
8
|
81
|
Amortisation of intangible assets
|
2
|
1
|
7
|
10
|
|
1
|
11
|
Net provisions charged to the consolidated
income statement
|
8
|
7
|
31
|
46
|
|
2
|
48
|
Net provisions include inventory, trade
receivables impairment and other liability provisions.
|
Distribution
|
|
|
|
2022
|
APAC
£m
|
Europe &
Africa
£m
|
Americas
£m
|
Total Distribution
£m
|
|
Retail
£m
|
Total
£m
|
Revenue
|
|
|
|
|
|
|
|
Total revenue
|
2,341
|
2,048
|
1,480
|
5,869
|
|
2,264
|
8,133
|
Results
|
|
|
|
|
|
|
|
Adjusted operating profit
|
163
|
90
|
110
|
363
|
|
48
|
411
|
Operating adjusting items
|
|
|
|
|
|
|
(11)
|
Operating profit from continuing
operations
|
|
|
|
|
|
|
400
|
Share of profit after tax of joint ventures and
associates
|
|
|
|
|
|
|
-
|
Profit before finance and tax
|
|
|
|
|
|
|
400
|
Finance income
|
|
|
|
|
|
|
21
|
Finance costs
|
|
|
|
|
|
|
(88)
|
Profit before tax from continuing
operations
|
|
|
|
|
|
|
333
|
Tax
|
|
|
|
|
|
|
(98)
|
Profit for the year from continuing
operations
|
|
|
|
|
|
|
235
|
2 Segmental analysis continued
The Group's reported segments are based on the
location of the Group's assets. Revenue earned from sales is
disclosed by origin and is not materially different from
revenue by destination. Revenue is further analysed as
follows:
2022
|
£m
|
UK
|
2,029
|
Australia
|
1,136
|
Rest of the world
|
4,968
|
Group
|
8,133
|
The Group's non-current assets by location
comprise intangible assets, property, plant and equipment,
right-of-use assets, joint ventures and associates, and are
analysed as follows:
2022
|
£m
|
UK
|
299
|
Rest of the world
|
2,053
|
Group
|
2,352
|
|
Distribution
|
|
|
|
2022
(Represented)
|
APAC
£m
|
Europe &
Africa
£m
|
Americas1
£m
|
Total
Distribution
£m
|
|
Retail
£m
|
Total
£m
|
Segment assets and liabilities
|
|
|
|
|
|
|
|
Segment assets
|
620
|
477
|
1,799
|
2,896
|
|
440
|
3,336
|
Other current assets
|
|
|
|
|
|
|
917
|
Other non-current assets
|
|
|
|
|
|
|
2,711
|
Segment liabilities
|
(921)
|
(483)
|
(1,199)
|
(2,603)
|
|
(453)
|
(3,056)
|
Other liabilities
|
|
|
|
|
|
|
(2,341)
|
Total net assets
|
|
|
|
|
|
|
1,567
|
Segment assets include net inventory,
receivables, and derivative assets. Segment liabilities include
payables, provisions, and derivative liabilities.
1 Segment assets and
liabilities in the Americas include a reclassification of
derivative assets and liabilities.
|
Distribution
|
|
|
|
2022 from continuing
operations
|
APAC
£m
|
Europe
&
Africa
£m
|
Americas
£m
|
Total
Distribution
£m
|
|
Retail
£m
|
Total
£m
|
Other segment items
|
|
|
|
|
|
|
|
Capital expenditure:
|
|
|
|
|
|
|
|
- Property, plant and equipment
|
14
|
13
|
12
|
39
|
|
22
|
61
|
- Leased vehicles, rental machinery and
equipment
|
9
|
4
|
-
|
13
|
|
-
|
13
|
- Right-of-use assets
|
10
|
8
|
9
|
27
|
|
7
|
34
|
- Intangible assets
|
1
|
1
|
1
|
3
|
|
1
|
4
|
Depreciation and impairment:
|
|
|
|
|
|
|
|
- Property, plant and equipment
|
7
|
7
|
9
|
23
|
|
1
|
24
|
- Leased vehicles, rental machinery and
equipment
|
4
|
4
|
-
|
8
|
|
-
|
8
|
- Right-of-use assets
|
30
|
6
|
13
|
49
|
|
8
|
57
|
Amortisation of intangible assets
|
8
|
6
|
7
|
21
|
|
2
|
23
|
Net provisions charged to the consolidated
income statement
|
22
|
21
|
10
|
53
|
|
6
|
59
|
Net provisions include inventory, trade
receivables impairment and other liability provisions.
3 ADJUSTING ITEMS
From
continuing operations
|
2023
£m
|
2022
£m
|
Other asset impairment reversals
|
-
|
10
|
Disposal of businesses (see note 9)
|
-
|
1
|
Acquisition and integration costs
|
(50)
|
(42)
|
Accelerated amortisation (SaaS)
|
-
|
(13)
|
Other income
|
-
|
13
|
Gain on pension indexation
|
-
|
20
|
Total adjusting items in operating
profit
|
(50)
|
(11)
|
Adjusting items in finance costs:
|
|
|
Interest on dividend payments to former
shareholders of Derco
|
(10)
|
-
|
Net monetary loss on hyperinflation
|
(29)
|
(29)
|
Total adjusting items before tax
|
(89)
|
(40)
|
Tax on adjusting items (see note 5)
|
10
|
(1)
|
Total adjusting items
|
(79)
|
(41)
|
During the year, the Group incurred costs of
£50m (2022: £42m) in relation to acquisition and integration of
businesses. Acquisition costs relate to the acquisitions of
new businesses and integration costs were incurred primarily in
relation to the integration of the Derco business. For more details
on acquisitions made during the year, please refer to note 9.
These costs have been reported as adjusting items to better reflect
the underlying performance of the business.
At 31 December 2022, a liability was acquired,
as part of the Derco acquisition, for the payment of a
pre-completion dividend to former shareholders. The payment of this
dividend was agreed to be made in four tranches, throughout 2023,
with interest accruing on the outstanding amounts. At 31 December
2023, all of the tranches have been paid and interest expense of
£10m has been recognised within finance costs and reported as an
adjusting item.
During 2022, Ethiopia was designated as a
hyperinflationary economy as its three-year cumulative inflation
rate exceeded 100%. As a result, IAS 29 Financial Reporting for
Hyperinflationary Economies became effective for the year ended 31
December 2022. The results and financial position of Ethiopia are
therefore restated to include the effect of indexation and the
resulting £29m net monetary loss on hyperinflation (2022: £29m net
monetary loss) has been recognised within net finance costs
and reported as an adjusting item.
In 2022, other asset impairment reversals of
£10m primarily related to property, plant & equipment and
right-of-use assets in the UK and Australia. These were
reported as an adjusting item, consistent with the reporting of the
original impairment charge.
In 2021, the Group started to migrate the
Group's existing ERP applications to a cloud-based solution. This
was a strategic decision to consolidate and upgrade the systems,
improve speed and performance, and facilitate centralised support
following the transformation of the Information Technology
organisational structure. The new solution was determined to
be Software as a Service (SaaS) and therefore the existing
software assets were no longer treated as an asset under
IAS 38 Intangible Assets once the migration to the new
solution had occurred. Consequently, the useful life of the
existing assets was reassessed and the impact accounted for
prospectively as a change in an estimate. This change resulted in
a significant increase in the amortisation recognised for
software costs and the incremental amortisation of £13m in 2022 was
disclosed as an adjusting item.
In the first half of 2022, the Group disposed of
its remaining operations in Russia and, at the time, management
concluded that the value of the expected proceeds from disposal was
£nil. In the second half of 2022, the Group received proceeds of
£13m which were reported as other income within continuing
operations as the subsequent receipt did not alter the initial (and
reassessed) conclusion that no consideration was expected. Given
the magnitude and nature of the item, the impact on the income
statement was reported as an adjusting item.
With effect from 1 April 2022, the Trustee of
the Inchcape Motors Pension Scheme now uses the Consumer Prices
Index (CPI) instead of Retail Prices Index (RPI) for those elements
of pensions from the Group, Motors and Normand sections that are
increased in line with RPI. Management concluded that the change in
indexation represented a plan amendment and the impact of the
change in benefits payable of £20m was recognised in the income
statement as a past service cost. Considering the magnitude and
nature of the item, the impact on the income statement was reported
as an adjusting item.
4 net Finance costs
From
continuing operations
|
2023
£m
|
2022
£m
|
Interest expense on bank and other
borrowings
|
124
|
27
|
Finance costs on lease liabilities
|
22
|
10
|
Stock holding interest
|
50
|
19
|
Net monetary loss on hyperinflation
|
29
|
29
|
Interest on deferred dividend
payment
|
10
|
-
|
Other finance costs
|
24
|
3
|
Finance costs
|
259
|
88
|
Bank and other interest income
|
(47)
|
(17)
|
Net interest income on post-retirement plan
assets and liabilities
|
(4)
|
(3)
|
Other finance income
|
(1)
|
(1)
|
Finance income
|
(52)
|
(21)
|
Net finance costs
|
207
|
67
|
Analysed as:
|
|
|
Net finance costs excluding adjusting finance
costs
|
168
|
38
|
Finance costs reported as adjusting
items
|
39
|
29
|
Net finance costs
|
207
|
67
|
Other finance costs include fees, commissions
and foreign exchange gains and losses.
Since 2022, in accordance with IAS 29 Financial
Reporting in Hyperinflationary Economies, the results and financial
position of the Group's operations in Ethiopia have been
restated to the purchasing power or inflationary measuring unit
current at the end of the reporting period. Therefore, finance
costs include the loss on hyperinflation in respect of monetary
items, which is also treated as an adjusting item.
5 Tax
This note only provides information about
corporate income taxes under IFRS. The Group operates in over 40
markets and territories across the world. The Group pays and
collects many different taxes in addition to corporate income taxes
including: payroll taxes, value added and sales taxes, property
taxes, product-specific taxes, and environmental taxes.
Such taxes borne by the Group are included in profit before
tax.
From
continuing operations
|
2023
£m
|
2022
£m
|
Current tax:
|
|
|
- Overseas
tax
|
146
|
111
|
Adjustments to prior year
liabilities:
|
|
|
- Overseas
tax
|
(6)
|
(6)
|
Current tax
|
140
|
105
|
Deferred tax:
|
|
|
Origination and reversal of temporary
differences
|
(10)
|
(7)
|
Deferred tax
|
(10)
|
(7)
|
Total tax charge
|
130
|
98
|
The total tax charge is analysed as
follows:
|
|
|
- Tax charge on adjusted
profit before tax
|
140
|
97
|
- Tax (credit)/charge on
adjusting items
|
(10)
|
1
|
Total tax charge
|
130
|
98
|
Details of the adjusting items for the year can
be found in note 3. Not all of the adjusting items will be taxable
or deductible for tax purposes. Therefore, the tax charge on
adjusting items represents the total of the current and deferred
tax on only those elements that are assessed as taxable or
deductible.
5 Tax continued
a. Factors affecting the tax expense for the
year
The effective tax rate for the year is 31.5%
(2022: 29.4%). The effective tax rate on adjusted profit before tax
is 27.9% (2022: 26.0%). The weighted average tax rate is 22.4%
(2022: 22.7%). The weighted average tax rate comprises the average
statutory rates across the Group, weighted in proportion to
accounting profits and losses before tax. The table below explains
the differences between the expected tax charge at the weighted
average tax rate and the Group's total tax charge.
From
continuing operations
|
2023
£m
|
2022
£m
|
Profit before tax
|
413
|
333
|
Profit before tax multiplied by the weighted
average tax rate of 22.4% (2022: 22.7%)
|
93
|
75
|
- Permanent differences
|
4
|
10
|
- Non-taxable income
|
(4)
|
(4)
|
- Prior year items
|
(4)
|
(1)
|
- Derecognition/(recognition) of deferred tax
assets
|
27
|
(2)
|
- Overseas tax audits and
settlements
|
1
|
2
|
- Taxes on undistributed earnings
|
2
|
2
|
- Acquisition of businesses
|
2
|
4
|
- Adjustments for hyperinflation
|
9
|
12
|
Total tax charge
|
130
|
98
|
The major component of recognition and
derecognition of deferred tax assets in the table above is the
non-recognition of deferred tax assets associated with tax losses
and UK corporate interest restrictions arising in the current
year.
b. Factors affecting the tax expense of future
years
The Group's future tax charge, and effective tax
rate, could be affected by several factors including; the
resolution of audits and disputes, changes in tax laws or tax
rates, repatriation of cash from overseas markets to the UK, the
ability to utilise brought forward losses, the impact of UK
corporate interest restrictions and business acquisitions and
disposals. In addition, a change in profit mix between low and high
taxed jurisdictions will impact the Group's future tax
charge.
The utilisation of brought forward tax losses or
reactivation of previously disallowed interest deductions under the
UK corporate interest restriction regulations and the recognition
of deferred tax assets associated with them may also give rise to
tax charges or credits. The recognition of deferred tax assets,
particularly in respect of tax losses, is based upon an assessment
of whether it is probable that there will be sufficient and
suitable taxable profits in the relevant legal entity or tax group
against which to utilise the assets in the future. Judgement is
required when determining probable future taxable profits. In the
event that actual taxable profits are different to those forecast,
the Group's future tax expense and effective tax rate could be
affected.
The Group is within the scope of the OECD Pillar
Two model rules, the relevant legislation has been enacted in the
United Kingdom, the jurisdiction in which Inchcape plc is
incorporated, and is effective from 1 January 2024. Since the
Pillar Two legislation was not effective at the reporting date, the
Group has no related current tax liability. Under the legislation,
the Group is liable to pay a top-up tax for the difference between
its Pillar Two effective tax rate per jurisdiction and the 15%
minimum rate. The Group expects to be subject to the top-up tax in
relation to its operations in several countries and the
average effective tax rate (before considering Pillar Two) of those
operations expected to be in scope is:
|
£m
|
Accounting profit for the year ending 31
December 2023
|
43
|
Tax charge for year ending 31 December
2023
|
3
|
2023 Average effective tax rate
|
6%
|
The Group is in the process of assessing its
exposure to the Pillar Two legislation and is implementing
processes to comply with the regulations. Although the average
effective tax rate disclosed above is below 15%, the Group might
not be exposed to paying Pillar Two income taxes in relation to
these jurisdictions. This is due to the impact of specific
adjustments envisaged in the Pillar Two legislation which give rise
to different effective tax rates compared to those calculated in
accordance with IAS 12. Due to the complexities in applying the
legislation, the quantitative impact of the legislation is not yet
reasonably estimable. Therefore, even for those jurisdictions with
an accounting effective tax rate above 15%, there may still be
Pillar Two tax implications.
The Group applies the exception to recognising
and disclosing information about deferred tax assets and
liabilities related to Pillar Two income taxes, as provided in the
amendments to IAS 12 issued in May 2023.
The Group has published its approach to tax on
www.inchcape.com covering its tax strategy and governance framework
in accordance with Schedule 19 Finance Act 2016.
6 Earnings per share
|
2023
£m
|
2022
£m
|
Profit/(loss) for the year
|
283
|
(6)
|
Non-controlling interests
|
(13)
|
(5)
|
Basic earnings
|
270
|
(11)
|
Loss for the year from discontinued
operations
|
-
|
241
|
Basic earnings from continuing operations
attributable to owners of the parent
|
270
|
230
|
Adjusting items
|
79
|
41
|
Adjusted earnings from continuing
operations
|
349
|
271
|
|
|
|
Basic
earnings/(loss) per share:
|
|
|
Basic earnings per share from continuing
operations
|
65.6p
|
61.1p
|
Basic loss per share from discontinued
operations
|
-
|
(64.0)p
|
Total basic earnings/(loss) per
share
|
65.6p
|
(2.9)p
|
|
|
|
Diluted
earnings/(loss) per share:
|
|
|
Diluted earnings per share from continuing
operations
|
64.8p
|
54.6p
|
Diluted loss per share from discontinued
operations
|
-
|
(57.1)p
|
Total diluted earnings/(loss) per
share
|
64.8p
|
(2.5)p
|
|
|
|
Adjusted
earnings per share from continuing operations:
|
|
|
Basic Adjusted earnings per share from
continuing operations
|
84.8p
|
72.0p
|
Diluted Adjusted earnings per share from
continuing operations
|
83.7p
|
64.4p
|
|
2023
number
|
2022
number
|
Weighted average number of fully paid ordinary
shares in issue during the year
|
412,689,716
|
377,146,960
|
Weighted average number of fully paid ordinary
shares in issue during the year:
|
|
|
- Held by the Inchcape Employee
Trust
|
(1,131,983)
|
(749,751)
|
Weighted average number of fully paid ordinary
shares for the purposes of basic EPS
|
411,557,733
|
376,397,209
|
Dilutive effect of potential ordinary
shares
|
5,408,280
|
44,733,701
|
Adjusted weighted average number of fully paid
ordinary shares in issue during the year for the
purposes of diluted EPS
|
416,966,013
|
421,130,910
|
Basic earnings/(loss) per share is calculated
by dividing the Basic earnings/(loss) for the year by the weighted
average number of fully paid ordinary shares in issue during the
year, less those shares held by the Inchcape Employee Trust and
repurchased as part of the share buyback programme.
Diluted earnings/(loss) per share is calculated
on the same basis as Basic earnings/(loss) per share with a further
adjustment to the weighted average number of fully paid ordinary
shares to reflect the effect of all dilutive potential ordinary
shares. Dilutive potential ordinary shares comprise share options
and other share-based awards. In 2022, dilutive potential ordinary
shares also include the shares to be issued in connection with the
acquisition of the Derco group (see note 9).
Basic Adjusted earnings (which excludes
adjusting items) is adopted to assist the reader in providing an
additional performance measure of the Group. Basic Adjusted
earnings per share is calculated by dividing the Adjusted earnings
for the year by the weighted average number of fully paid
ordinary shares in issue during the year, less those shares held
by the Inchcape Employee Trust and repurchased as part of the
share buyback programme.
Diluted Adjusted earnings per share is
calculated on the same basis as the Basic Adjusted earnings per
share with a further adjustment to the weighted average number of
fully paid ordinary shares to reflect the effect of all dilutive
potential ordinary shares. Information presented for diluted and
diluted adjusted earnings per ordinary share uses the weighted
average number of shares as adjusted for potentially dilutive
ordinary shares as the denominator.
7 Dividends
The following dividends were paid by the
Group:
|
2023
£m
|
2022
£m
|
Interim dividend for the six months ended 30
June 2023 of 9.6p per share (30 June 2022: 7.5p per
share)
|
40
|
28
|
Final dividend for the year ended 31 December
2022 of 21.3p per share (31 December 2021: 16.1p per
share)
|
88
|
61
|
|
128
|
89
|
A final proposed dividend for the year ended 31
December 2023 of 24.3p per share is subject to approval by
shareholders at the Annual General Meeting and has not been
included as a liability as at 31 December 2023. The Group has
sufficient distributable reserves to pay dividends to its ultimate
shareholders. Distributable reserves are calculated on an
individual legal entity basis and the ultimate parent company,
Inchcape plc, currently has adequate levels of realised profits
within its retained earnings to support dividend payments. At 31
December 2023, Inchcape plc's company-only distributable reserves
were £276m. On an annual basis, the distributable reserve levels of
the Group's subsidiary undertakings are reviewed and dividends paid
up to Inchcape plc where it is appropriate to do so.
8 Notes to the consolidated statement of cash
flows
a. Reconciliation of cash generated from
operations
|
2023
£m
|
2022
£m
|
Cash flows from operating activities
|
|
|
Operating profit - continuing
operations
|
619
|
400
|
Operating profit - discontinued
operations
|
-
|
21
|
Adjusting items (see note 3)
|
50
|
11
|
Amortisation of intangible assets (including
non-adjusting impairment charges)
|
11
|
10
|
Depreciation of property, plant and equipment
(including non-adjusting impairment charges)
|
61
|
32
|
Depreciation of right-of-use assets (including
non-adjusting impairment charges)
|
81
|
58
|
Profit on disposal of property, plant and
equipment and intangibles
|
(16)
|
(2)
|
Gain on disposal of right-of-use
assets
|
-
|
(1)
|
Gain on disposal of businesses
|
-
|
(3)
|
Share-based payments charge
|
15
|
10
|
Increase in inventories
|
(251)
|
(396)
|
Increase in trade and other
receivables
|
(9)
|
(141)
|
Increase in trade and other payables
|
415
|
618
|
(Decrease)/increase in provisions
|
(1)
|
30
|
Pension contributions more than pension charge
for the year1
|
(1)
|
(2)
|
Increase in leased vehicles, rental machinery
and equipment
|
(18)
|
-
|
Payments in respect of operating adjusting
items
|
(57)
|
(28)
|
Other non-cash items
|
1
|
2
|
Cash generated from operations
|
900
|
619
|
8 Notes to the consolidated statement of cash flows
continued
b. Net debt reconciliation
|
Liabilities from financing activities
|
|
Assets
|
|
|
Borrowings
£m
|
Leases
£m
|
Sub-total
£m
|
|
Cash/bank overdrafts
£m
|
Total
net debt
£m
|
Net funds at 1 January 2022
|
(210)
|
(324)
|
(534)
|
|
589
|
55
|
Cash flows
|
(596)
|
64
|
(532)
|
|
797
|
265
|
Acquisitions
|
(622)
|
(174)
|
(796)
|
|
(395)
|
(1,191)
|
Disposals
|
-
|
13
|
13
|
|
(17)
|
(4)
|
New lease liabilities
|
-
|
(58)
|
(58)
|
|
-
|
(58)
|
Foreign exchange adjustments
|
-
|
(20)
|
(20)
|
|
76
|
56
|
Net debt at 1 January 2023
|
(1,428)
|
(499)
|
(1,927)
|
|
1,050
|
(877)
|
Cash flows
|
412
|
87
|
499
|
|
(400)
|
99
|
Acquisitions (see note 9(a))
|
(23)
|
(11)
|
(34)
|
|
(146)
|
(180)
|
Period adjustments (see note 9(b))
|
(7)
|
(1)
|
(8)
|
|
9
|
1
|
Disposals
|
-
|
-
|
-
|
|
1
|
1
|
New lease liabilities
|
-
|
(37)
|
(37)
|
|
-
|
(37)
|
Foreign exchange adjustments
|
11
|
21
|
32
|
|
(74)
|
(42)
|
Other non-cash movements
|
(6)
|
-
|
(6)
|
|
-
|
(6)
|
Net debt at 31 December 2023
|
(1,041)
|
(440)
|
(1,481)
|
|
440
|
(1,041)
|
Net funds/(debt) is analysed as
follows:
|
2023
£m
|
2022
£m
|
Cash and cash equivalents as per the statement
of financial position
|
689
|
1,064
|
Borrowings - disclosed as current
liabilities
|
(652)
|
(546)
|
Add back: amounts treated as debt
financing
|
403
|
532
|
Cash and cash equivalents as per the statement
of cash flows
|
440
|
1,050
|
Debt financing
|
|
|
Amounts to be treated as debt
financing
|
(403)
|
(532)
|
Borrowings - disclosed as non-current
liabilities
|
(638)
|
(896)
|
Lease liabilities
|
(440)
|
(499)
|
Debt financing
|
(1,481)
|
(1,927)
|
Net debt
|
(1,041)
|
(877)
|
Add back: lease liabilities
|
440
|
499
|
Adjusted net debt
|
(601)
|
(378)
|
9 Acquisitions and disposals
a. 2023 Acquisitions
CATS
On 2 August 2023, the Group acquired 60% of the
share capital of the CATS Group of Companies (CATS) for cash
consideration of £54m. The deal expands the Group's global
distribution footprint as it enters the Philippines, further
building on its well-established presence in the APAC region. It
also strengthens the Group's geographic reach and partnerships with
Mercedes-Benz, Chrysler, Jeep, Dodge, Jaguar and Land Rover, and
broaden its relationships, adding RAM to its list of mobility
partners. Non-controlling interests of £30m have been recognised,
calculated as the proportionate share of acquired net identifiable
assets. Provisional goodwill of £12m arose on the acquisition and
is not expected to be deductible for tax purposes.
A distribution agreement intangible asset of
£77m has been recorded, valued using the multi period excess
earnings (MEEM) approach.
Mercedes-Benz Indonesia
On 29 September 2023, the Group acquired 70% of
the share capital of Mercedes-Benz's Indonesian distribution
business for cash consideration of £86m. Deferred consideration
represents payments to be made to the Seller on settlement of
certain acquired receivables. The deal expands the Group's existing
footprint in Indonesia and, like the CATS acquisition, continues to
build its presence in the APAC region. It also strengthens the
Group's relationship with Mercedes-Benz. Land and buildings of £78m
were acquired as part of the business combination, for which value
was included in the agreed purchase price. Non-controlling
interests of £34m have been recognised, calculated as the
proportionate share of acquired net identifiable assets.
Provisional goodwill of £17m arose on the acquisition and is not
expected to be deductible for tax purposes.
A distribution agreement intangible asset of
£29m has been recognised, valued using the multi period excess
earnings (MEEM) approach.
9
acquisitions and disposals continued
Other acquisitions
On 2 August 2023 the Group acquired the SAIC
Maxus distribution business in New Zealand for cash consideration
of £29m. Provisional goodwill of £6m arose on the acquisition. The
Group also acquired certain assets and liabilities and the ongoing
operations of Auto Insure Ptd. Ltd. in the period for cash
consideration of £4m to expand its aftersales capacity in
Singapore.
|
CATS
£m
|
Mercedes-Benz Indonesia
£m
|
Other
£m
|
Total
£m
|
Assets and liabilities acquired, at provisional
values1
|
|
|
|
|
Non-current assets
|
|
|
|
|
Intangible assets
|
77
|
29
|
7
|
113
|
Property, plant and equipment
|
2
|
91
|
5
|
98
|
Right-of-use assets
|
7
|
-
|
4
|
11
|
Deferred tax assets
|
-
|
7
|
-
|
7
|
|
|
|
|
|
Current assets
|
|
|
|
|
Inventories
|
42
|
97
|
17
|
156
|
Trade and other receivables
|
8
|
27
|
1
|
36
|
Current tax assets
|
-
|
7
|
-
|
7
|
Cash and cash equivalents
|
15
|
12
|
-
|
27
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Trade and other payables
|
(52)
|
(105)
|
(5)
|
(162)
|
Provisions
|
-
|
(4)
|
(1)
|
(5)
|
Borrowings
|
-
|
(23)
|
-
|
(23)
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
Deferred tax liabilities
|
(19)
|
(16)
|
(1)
|
(36)
|
Lease liabilities
|
(7)
|
-
|
(4)
|
(11)
|
Retirement benefit liability
|
(1)
|
(10)
|
-
|
(11)
|
Net identifiable assets acquired
|
72
|
112
|
23
|
207
|
Less: Non-controlling interests
|
(30)
|
(34)
|
-
|
(64)
|
Goodwill
|
12
|
17
|
10
|
39
|
Net assets acquired
|
54
|
95
|
33
|
182
|
Consideration comprises
|
|
|
|
|
Deferred consideration
|
-
|
9
|
-
|
9
|
Cash consideration
|
54
|
86
|
33
|
173
|
Total consideration
|
54
|
95
|
33
|
182
|
1. The fair values of assets and
liabilities acquired, as stated above, are provisional
values.
The gross contractual amount receivable for
trade receivables was £26m and the best estimate at the acquisition
date of the contractual cash flows not expected to be collected was
£2m.
Acquisition and integration costs of £50m were
recognised in net operating expenses in the period, relating to
current and prior year acquisitions (see note 3).
Cash outflow to acquire businesses, net of cash
and overdrafts acquired
|
|
2023
£m
|
2022
£m
|
Current year acquisitions
|
|
|
|
CATS
|
|
39
|
-
|
Mercedes-Benz Indonesia
|
|
74
|
-
|
Other
|
|
33
|
-
|
Prior year acquisitions including deferred and
contingent payments
|
|
|
|
Derco
|
|
(9)
|
312
|
Ditec
|
|
-
|
8
|
ITC Group
|
|
-
|
57
|
Other
|
|
-
|
18
|
Net cash outflow
|
|
137
|
395
|
9
acquisitions and disposals continued
b. 2022 Acquisitions
Acquisition of the Derco Group
On 31 December 2022, the Group acquired 100% of
the share capital of Dercorp CL and merged a subsidiary company
with Dercorp Ex (together with Dercorp CL, "Derco"). Derco is a
multi-brand automotive distributor, and was the largest independent
distributor by volume in Latin America, with a strong track record
of profitable growth. Derco has significant presence across four
attractive markets of Bolivia, Chile, Colombia, and Peru, and with
long-standing partnerships with global mobility partners such as
Suzuki, Mazda, Chevrolet, Changan, JAC, Renault, Great Wall, and
Haval. The transaction was accounted for as a business combination
and significantly expanded the Group's position in highly
attractive and fast growth markets within Latin America and is
expected to deliver significant value creation through enhanced
growth prospects and the delivery of meaningful recurring
synergies.
Goodwill of £136m arose on the acquisition and
is attributable to the anticipated future cash flows of the
acquired business and synergies expected to arise following
integration with the Group's existing businesses in South America.
Specifically, the goodwill represents the premium paid to expand
the Group's presence in this important market and to create a scale
Distribution platform across South America with attractive growth
prospects. This provides a platform to deliver growth and improved
returns far quicker than would have been achievable through organic
expansion. None of the goodwill is expected to be deductible for
tax purposes.
Intangible assets (not including goodwill) with
fair values of £559m were recognised at the date of acquisition,
including distribution agreements (£517m), brands (£19m) and
customer relationships (£13m). The distribution agreement and
customer relationship intangible assets were valued using the multi
period excess earnings (MEEM) approach, while the brands were
valued using the relief from royalty approach.
The consideration to acquire the share capital,
initially valued at £723m, was satisfied by the issue of 38.5m new
shares in the Inchcape group and by £407m in cash. Final
consideration was reduced by £9m after the conclusion of the
completion accounts process. The fair value of the shares issued
was based on the Inchcape plc closing share price at 30 December
2022 of 820p per share. Given completion occurred on a non-business
day, the shares were not registered until 4 January 2023 and so the
amounts relating to shares to be issued were classified within
other reserves in the consolidated statement of financial position
at 31 December 2022. The issuing of shares qualified
for merger relief.
The cash consideration for the acquisition was
partly financed through the draw down, in December 2022, of a £350m
bridge facility and a £250m term loan facility.
Acquisition-related costs of £34m incurred in
connection with the acquisition of Derco were recorded within net
operating expenses, and recognised as adjusting items in the
consolidated income statement in the year ended 31 December
2022.
9
acquisitions and disposals continued
The accounting standards allow a period of up to
a year to finalise the accounting for an acquisition. Details of
the fair values of the identifiable assets and liabilities, after
adjustments made within the period, are set out below:
|
2022
£m
|
Period
Adjustments1
£m
|
2023
£m
|
Assets and liabilities acquired, at provisional
values
|
|
|
|
Non-current assets
|
|
|
|
Intangible assets
|
559
|
-
|
559
|
Property, plant and equipment
|
161
|
-
|
161
|
Right-of-use assets
|
124
|
(7)
|
117
|
Investments in joint ventures and
associates
|
11
|
-
|
11
|
Trade and other receivables
|
3
|
-
|
3
|
Deferred tax assets
|
10
|
1
|
11
|
|
|
|
|
Current assets
|
|
|
|
Inventories
|
796
|
4
|
800
|
Trade and other receivables
|
316
|
-
|
316
|
Derivative financial instruments
|
5
|
-
|
5
|
Current tax assets
|
34
|
(9)
|
25
|
Cash and cash equivalents
|
95
|
-
|
95
|
|
|
|
|
Current liabilities
|
|
|
|
Trade and other payables
|
(563)
|
-
|
(563)
|
Current tax liabilities
|
(21)
|
7
|
(14)
|
Provisions
|
(6)
|
-
|
(6)
|
Lease liabilities
|
(19)
|
-
|
(19)
|
Borrowings
|
(532)
|
-
|
(532)
|
|
|
|
|
Non-current liabilities
|
|
|
|
Provisions
|
(4)
|
(4)
|
(8)
|
Deferred tax liabilities
|
(174)
|
2
|
(172)
|
Lease liabilities
|
(118)
|
(1)
|
(119)
|
Borrowings
|
(85)
|
(7)
|
(92)
|
Net identifiable assets
|
592
|
(14)
|
578
|
Goodwill
|
131
|
5
|
136
|
Net assets acquired
|
723
|
(9)
|
714
|
Consideration comprises
|
|
|
|
Shares issued
|
316
|
-
|
316
|
Cash consideration
|
407
|
(9)
|
398
|
Total consideration
|
723
|
(9)
|
714
|
1. Due to the period adjustments not
being material, the prior year statement of financial position has
not been restated.
Cash
outflow to acquire businesses, net of cash and overdrafts
acquired
|
2023
£m
|
2022
£m
|
Cash consideration
|
(9)
|
407
|
Less: Cash acquired
|
-
|
(95)
|
Net cash (inflow)/outflow
|
(9)
|
312
|
9
acquisitions and disposals continued
Other acquisitions
On 28 March 2022, to expand its distribution
footprint in the Americas, the Group acquired 70% of
Comercializadora Ditec Automoviles S.A., acquiring the distribution
rights to Porsche, Volvo, and Jaguar Land Rover in Chile, for total
consideration of £15m. Distribution agreements with a fair
value of £28m were recognised. Goodwill of £3m arose on the
acquisition. None of the goodwill is expected to be deductible for
tax purposes. In September 2023 the Group finalised the purchase of
the remaining 30% stake in Ditec. This stake was previously subject
to a written put option, resulting in a liability on the Group's
statement of financial position, which has now been
extinguished.
On 29 April 2022, the Group acquired the entire
share capital of ITC Group, a distributor of Suzuki, Mercedes-Benz,
Subaru, and Chrysler brands in the Caribbean, from the Simpson
Group. The total cash consideration paid was £61m. Distribution
agreements with a fair value of £29m were recognised. Goodwill of
£nil arose on the acquisition. These businesses were acquired to
further expand the Group's footprint with both existing and
new mobility company partners and using our distribution
business as a platform to capture more of a vehicle's lifecycle
value.
During 2022, the Group also acquired businesses
in Guam and the UK. The total cost of these acquisitions was £18m
and goodwill of £7m was recognised.
c. 2022 Disposals and discontinued operations
In the first half of 2022, the Group agreed the
sale of its remaining retail operations in Russia to management.
The business represented the Group's remaining operation in Russia
following the disposal of its St Petersburg business during 2021.
The Russian operation was reported in the prior period as a
discontinued operation. Financial information relating to the
discontinued operation for the period to the date of disposal is
set out below.
The price agreed for the sale of the Russian
business was €76m (c£63m), to be satisfied over a period of five
years in annual instalments. Significant uncertainty exists with
regards to the amount that will ultimately be recoverable given the
precarious outlook for the Russian economy and the uncertainty
regarding the continued supply of vehicles and parts by the
mobility partners. In estimating the amount to be recognised
at the time of the disposal, management developed a number of
scenarios for the possible performance of the business.
Probabilities were applied to these scenarios which indicated that
some of the receivable would be received over time. However, given
the difficulties in remitting the proceeds and uncertainty over
whether this would change in the future, management concluded that
the disposal proceeds should be recognised at £nil.
In the second half of 2022, the Group received
the first annual instalment from the sale of the Russian business
of €15m (£12.8m). This was recorded as other income within the
operating profit from continuing operations and was reported as an
adjusting item. Management have subsequently reassessed the amount
at which the remaining receivable should be recorded as at 31
December 2023. The outlook for the Russian economy remains
precarious and there is continued uncertainty with regards to the
supply of vehicle and parts and the ability of the purchaser to
remit the instalments. Management therefore concluded that the
value of the remaining instalments should be recognised at £nil at
31 December 2023.
Financial performance and cash flow
information
The financial performance and cash flow
information presented below is for the five months ended 31 May
2022.
|
|
2022
£m
|
Revenue
|
|
237
|
Expenses
|
|
(216)
|
Operating profit
|
|
21
|
Finance (costs)/income
|
|
(1)
|
Profit before tax
|
|
20
|
Tax
|
|
(5)
|
Profit after tax of discontinued
operation
|
|
15
|
Loss on disposal
|
|
(256)
|
(Loss)/profit from discontinued
operation
|
|
(241)
|
Exchange differences on translation of
discontinued operation
|
|
118
|
Other comprehensive (loss)/income from
discontinued operation
|
|
(123)
|
|
|
2022
£m
|
Net cash inflow from operating
activities
|
|
21
|
Net cash outflow from investing
activities
|
|
(2)
|
Net cash outflow from financing
activities
|
|
(2)
|
Net increase in cash generated from
discontinued operation
|
|
17
|
9
acquisitions and disposals continued
|
Russia
£m
|
UK Retail
£m
|
Total
£m
|
Disposal proceeds, net of disposal
costs
|
(3)
|
6
|
3
|
Net assets disposed of
|
(155)
|
(3)
|
(158)
|
(Loss)/gain on disposal before reclassification
of foreign currency translation reserve
|
(158)
|
3
|
(155)
|
Recycling of foreign currency translation
reserve
|
(99)
|
-
|
(99)
|
(Loss)/gain on disposal
|
(257)
|
3
|
(254)
|
|
Russia
£m
|
UK Retail
£m
|
Total
£m
|
Consideration received, net of disposal costs
paid
|
10
|
6
|
16
|
Cash & cash equivalents disposed
of
|
(33)
|
-
|
(33)
|
Net cash (outflow)/inflow on disposal of
business
|
(23)
|
6
|
(17)
|
During 2022, the Group also disposed of a
retail site in the UK for £6m and received £0.2m of deferred
proceeds from sites disposed of in 2021. None of these disposals
were material enough to be shown as discontinued operations on the
face of the consolidated income statement as they did not represent
a major line of business or geographical area of
operations.
10 Foreign currency translation
The main exchange rates used for translation
purposes are as follows:
|
Average
rates
|
|
Closing
rates*
|
|
2023
|
2022
|
|
2023
|
2022
|
Australian dollar
|
1.88
|
1.78
|
|
1.87
|
1.77
|
Chilean peso
|
1,044.74
|
1,073.09
|
|
1,130.41
|
1,028.42
|
Ethiopian birr1
|
71.84
|
64.72
|
|
71.84
|
64.72
|
Euro
|
1.15
|
1.17
|
|
1.15
|
1.13
|
Hong Kong dollar
|
9.75
|
9.70
|
|
9.98
|
9.44
|
Russian rouble2
|
n/a
|
106.85
|
|
n/a
|
78.92
|
Singapore dollar
|
1.67
|
1.71
|
|
1.68
|
1.62
|
US dollar
|
1.25
|
1.24
|
|
1.28
|
1.21
|
* At 31 December.
1. In 2023, the results for Ethiopia are
translated at the closing rate as required by IAS 21 The Effects of
Changes in Foreign Exchange Rates for hyperinflationary foreign
operations.
2. Average rates for the Russian rouble
represent the average rates for the 5-month period ending 31 May
2022, and the closing rates for the Russian rouble are as at the
date of disposal of Russian operations.
11 Events after the reporting period
On 29 January 2024, following approaches from a
number of interested parties, the Group announced that it was
reviewing strategic options for the UK Retail business, which could
potentially include a sale. At the reporting date, the strategic
review was in initial stages and as there is no certainty that a
transaction would result, the Group has concluded that the UK
Retail business did not meet the criteria to be classified as an
asset held for sale as at 31 December 2023.
12 Alternative performance measures (APMs)
The Group assesses its performance using a
variety of alternative performance measures which are not defined
under International Financial Reporting Standards. These provide
insight into how the Board and Executive Committee monitor
the Group's strategic and financial performance, and provide
useful information on the trends, performance, and position of the
Group.
The Group's income statement and segmental
analysis identify separately adjusted measures and adjusting items.
These adjusted measures reflect adjustments to IFRS measures.
The Directors consider these adjusted measures to be
an informative additional measure of the ongoing trading
performance of the Group. Adjusted results are stated before
adjusting items and on a continuing operations basis.
Adjusting items can include gains or losses on
the disposal of businesses, restructuring of businesses,
acquisition costs, asset impairments and the tax effects of these
items. Adjusting items excluded from adjusted results can evolve
from one financial period to the next depending on the nature of
adjusting items or one-off activities.
12 Alternative performance measures (APMs)
continued
Constant currency
Some comparative performance measures are
translated at constant exchange rates, called 'constant currency'
measures. This restates the prior period results at a common
exchange rate to the current period and therefore excludes
the impact of changes in exchange rates used for
translation.
Performance measure
|
|
Definition
|
|
Why we
measure it
|
Adjusted gross profit
|
|
Gross profit before adjusting items.
Refer to the consolidated income statement.
|
|
A key metric of the direct profit contribution
from the Group's revenue streams (e.g. Vehicles and
Aftersales).
|
Adjusted operating profit
|
|
Operating profit before adjusting items.
Refer to the consolidated income statement.
|
|
A key metric of the Group's business
performance.
|
Operating margin
|
|
Adjusted operating profit divided by
revenue.
|
|
A key metric of operational efficiency, ensuring
that we are leveraging global scale to translate sales growth into
profit.
|
Adjusted profit before tax
|
|
Represents the profit made after operating and
interest expense excluding the impact of adjusting items and before
tax is charged.
Refer to consolidated income statement.
|
|
A key driver of delivering sustainable and
growing earnings to shareholders.
|
Adjusted earnings before interest, tax,
depreciation and amortisation
|
|
Represents the earnings before interest expense,
taxation, depreciation and amortisation expenses, and excluding the
impact of adjusting items.
|
|
One of the key measures used in monitoring the
Group's leverage and capital allocation.
|
Adjusting items
|
|
Items that are charged or credited in the
consolidated income statement which are material and non-recurring
in nature.
Refer to note 3.
|
|
The separate reporting of adjusting items helps
provide additional useful information regarding the Group's
business performance and is consistent with the way that financial
performance is measured by the Board and the Executive
Committee.
|
Adjusted earnings per share
|
|
Represents earnings per share excluding the
impact of adjusting items.
Refer to note 6.
|
|
A measure useful to shareholders and investors
to understand the earnings attributable to shareholders without the
impact of adjusting items.
|
Net capital expenditure
|
|
Cash outflows from the purchase of property,
plant and equipment and intangible assets less the proceeds from
the disposal of property, plant and equipment and intangible
assets.
|
|
A measure of the net amount invested in
operational facilities in the period.
|
Free cash flow
|
|
Net cash flows from operating activities, before
adjusting cash flows, less normalised net capital expenditure and
dividends paid to non-controlling interests.
|
|
A key driver of the Group's ability to 'Invest
to Accelerate Growth' and to make distributions to
shareholders.
|
Return on capital
employed (ROCE)
|
|
Operating profit (before adjusting items)
divided by the average of opening and closing capital employed,
where capital employed is defined as net assets add net debt/less
net funds.
|
|
ROCE is a measure of the Group's ability to
drive better returns for investors on the capital we
invest.
|
Adjusted return on capital employed
(ROCE)*
|
|
Operating profit (before adjusting items)
divided by the average of opening and closing capital employed,
where capital employed is defined as net assets add net debt/less
net funds, less the capital employed of Derco, which was acquired
on the last day of 2022 and therefore did not contribute to
operating profit during the year.
|
|
Adjusted ROCE is a measure of the Group's
underlying ability to drive better returns for investors on the
capital we invest.
|
Net (debt)/funds
|
|
Cash and cash equivalents less borrowings and
lease liabilities adjusted for the fair value of derivatives that
hedge interest rate or currency risk on borrowings.
Refer to note 8.
|
|
A measure of the Group's net indebtedness that
provides an indicator of the overall balance sheet
strength.
|
Adjusted (net debt)/net cash
|
|
Cash and cash equivalents less borrowings
adjusted for the fair value of derivatives that hedge interest rate
or currency risk on borrowings and before the incremental impact of
IFRS 16 lease liabilities.
Refer to note 8.
|
|
A measure of the Group's net indebtedness that
provides an indicator of the overall balance sheet strength and is
widely used by external parties.
|
Constant currency % change
|
|
Presentation of reported results compared to
prior period translated using constant rates of
exchange.
|
|
A measure of business performance which excludes
the impact of changes in exchange rates used for
translation.
|
Organic growth
|
|
Organic growth is defined as sales growth in
operations that have been open for at least a year at constant
foreign exchange rate.
|
|
A measure of underlying business performance
which excludes the impact of acquisition and disposals in the
period.
|
* Adjusted
ROCE is only relevant for 2022.
12 Alternative performance measures (APMs)
continued
APM - Adjusted profit before tax (from
continuing operations)
|
2023
£m
|
2022
£m
|
Gross Profit
|
1,939
|
1,325
|
Less: Segment operating expenses
|
(1,270)
|
(914)
|
Adjusted Operating Profit
|
669
|
411
|
Less: Adjusting items in net operating
expenses
|
(50)
|
(11)
|
Operating Profit
|
619
|
400
|
Less: Net finance costs and JV
profits
|
(206)
|
(67)
|
Profit Before Tax
|
413
|
333
|
Add back: Adjusting Items in net operating
expenses
|
50
|
11
|
Add back: Adjusting items in net finance
costs
|
39
|
29
|
Adjusted profit before tax
|
502
|
373
|
APM - Free cash flow (from continuing
operations)
|
2023
£m
|
2023
£m
|
2022
£m
|
2022
£m
|
Net cash generated from operating
activities
|
|
593
|
|
494
|
Add back: Payments in respect of adjusting
items
|
|
57
|
|
28
|
Net cash generated from operating activities,
before adjusting items
|
|
650
|
|
522
|
Purchase of property, plant and
equipment
|
(88)
|
|
(64)
|
|
Purchase of intangible assets
|
(5)
|
|
(4)
|
|
Proceeds from disposal of property, plant and
equipment
|
31
|
|
10
|
|
Net capital expenditure
|
|
(62)
|
|
(58)
|
Net payment in relation to leases
|
|
(84)
|
|
(63)
|
Dividends paid to non-controlling
interests
|
|
(6)
|
|
(4)
|
Free cash flow
|
|
498
|
|
397
|
Less: Free cash flow from discontinued
operations
|
|
-
|
|
(17)
|
Free cash flow from continuing
operations
|
|
498
|
|
380
|
APM - Return on capital employed (from
continuing operations)
|
2023
£m
|
2022
£m
|
Operating profit
|
619
|
400
|
Adjusting items in net operating
expenses
|
50
|
11
|
Adjusted operating profit
|
669
|
411
|
Net assets
|
1,620
|
1,567
|
Add net debt
|
1,041
|
877
|
Capital employed
|
2,661
|
2,444
|
Effect of averaging
|
(108)
|
(741)
|
Average capital employed
|
2,553
|
1,703
|
Return on capital employed
|
26.2%
|
24.1%
|
APM - Adjusted return on capital employed (from
continuing operations)
|
|
|
Capital employed - continuing
operations
|
2,661
|
2,444
|
Less: Derco capital employed
|
n/a*
|
(1,383)
|
Adjusted capital employed - continuing
operations
|
2,661
|
1,061
|
Effect of averaging
|
(108)
|
(49)
|
Average adjusted capital employed
|
2,553
|
1,012
|
Adjusted return on capital employed
|
26.2%
|
40.6%
|
* Capital employed for Derco was
removed from prior year as the acquisition completed end of 2022,
hence the ratio was adjusted for this.
APM - Adjusted net debt
|
2023
£m
|
2022
£m
|
Net debt
|
(1,041)
|
(877)
|
Add back: lease liabilities
|
440
|
499
|
Adjusted net debt
|
(601)
|
(378)
|
12 Alternative performance measures (APMs)
continued
APM - Adjusted earnings per share (from
continuing operations)
|
2023
£m
|
2022
£m
|
Operating profit
|
619
|
400
|
Add: adjusting items in net operating
expenses
|
50
|
11
|
Adjusted operating profit
|
669
|
411
|
Share of profit after tax of joint ventures and
associates
|
1
|
-
|
Adjusted profit before finance and
tax
|
670
|
411
|
Net finance costs
|
(207)
|
(67)
|
Add: adjusting items in net finance
costs
|
39
|
29
|
Adjusted profit before tax
|
502
|
373
|
Tax on adjusted profit
|
(140)
|
(97)
|
Adjusted profit after tax
|
362
|
276
|
Less: non-controlling interests
|
(13)
|
(5)
|
Adjusted earnings
|
349
|
271
|
|
|
|
Weighted average number of shares
(m)
|
412
|
376
|
Dilutive effect (m)
|
5
|
45
|
|
|
|
Basic adjusted earnings per share
|
84.8p
|
72.0p
|
Diluted adjusted earnings per share
|
83.7p
|
64.4p
|