Inchcape plc

Welcome to the Indicate PLC Q1 Trading Update conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star and 1 on your telephone. I must advise you that this conference is being recorded today on Thursday, the 28th of April, 2022. I'd now like to hand the conference over to your speaker today, Duncan Tate. Please go ahead.

Good morning, everyone, and thank you for joining us. As usual, I am joined on the call by our CFO, Heisbert de Zooten, and our Head of Investor Relations, Raghav Gupta. I'll begin by commenting on the group's performance before handing over to Heisbert, who will give more detail. We'll then be happy to take your questions. Let me first provide you with some details of the sale of our Russian operations, which we announced this morning. Following our decision to exit Russia, we work closely with our OEM partners and have now agreed the sale of our remaining business in Moscow to local management, led by the current CEO and CFO. Payment of the purchase price of 63 million pounds is deferred over a period of five years. And whilst we have no intention to re-enter the market, There is a mechanism in place which would enable Inchcape to benefit from an increase in value of the business over the next seven years in the event of an onward sale. I am pleased with how quickly our team has implemented the decision to exit Russia. Now let's move to our Q1 performance and I will also make some comments on our full year outlook. As mentioned in this morning's announcement, the group made a great start to 2022. with both distribution and retail delivering strong revenue growth and margins. Excluding Russia, revenue increased 13% on an organic basis versus the same period last year. Top-line momentum has continued to build from the fourth quarter of 2021, despite the continuing supply shortages. Our performance was supported by a combination of robust consumer demand and price-mixed tailwinds. order books in many markets continue to be at record levels. In vehicle lifecycle services, VLS, we also made good progress in Q1 with an encouraging performance of Bravo Auto in the UK and implementation progressing into Europe and Asia. In terms of inorganic growth, during the quarter we acquired DTEK. This gives us first-time distribution relationships with premium brands Porsche and Volvo in Chile, a market that we have successfully been operating in many years. It also further broadens our global distribution coverage for Jaguar Land Rover. The acquisition is a good example of the accelerate strategy in action, leveraging the combination of our leading global position and our digital and data capabilities to expand our footprint. We are excited about the growth prospect for Chile and the Americas region overall. With formal approvals now received, we also expect to complete the acquisition of Sensum Notas and ITC, which we announced in December last year, in the next few days. The group continues to see an attractive and healthy pipeline of inorganic opportunities of varying sizes, which we are actively pursuing across all our geographies. And now to the outlook. So far in 2022, we have experienced a continuation of the trends from last year, with demand ahead of supply and high margins. We expect this trend to continue, at least for the remainder of the year, based on our view of the strength of consumer demand in our markets and OEM production plans. Against this backdrop, the Group expects to deliver FY22 profit before tax of at least £300 million excluding any contribution from the Russian business. This represents an improvement of 25% on the prior year and is primarily driven by the further strengthening of our distribution business. Let me now hand over to Heisbert who will run through the regions.

Thank you Duncan and good morning everyone. Please note that all comments made on our Q1 performance exclude the contribution from the Russian business, which will be treated as a discontinued operation in 2022. In Q1, the group generated £1.8 billion of revenue. On an organic basis, revenue increased by 13% versus the same period last year. On a reported basis, revenue increased by 6% year over year. and currency had an adverse 3% impact. Looking at our two segments, in distribution, revenue was ahead of the prior year and above Q4 2021, with aftermarket sales continuing to support performance against the backdrop of low vehicle supply. The performance within the regions was broadly consistent with the second half of 2021, where we grew strongly in the Americas and in Europe. In retail, the strong year-on-year revenue growth can largely be attributed to the impact of pandemic-related restrictions in the UK on the first quarter of 2021 comparator. Let me now provide some further detail. Distribution overall delivered 11% higher organic sales versus the prior year. Starting with Asia and Singapore, New vehicle sales were as we expected below last year when we benefited from more availability of certificates, after sales revenue continued to grow. In Hong Kong, new vehicle sales were impacted by pandemic restrictions and supply, while we made encouraging progress on used cars. Our other markets in Asia performed strongly. In Australasia, whilst we have an exceptionally strong order book, supply constraints continue to impact volumes. Youth and aftermarket sales were robust. And in Europe, we continue to gain share across our key markets, driven by strong execution. And note, in Europe, the prior year was somewhat impacted by COVID restrictions. The Americas region saw a strong performance across all markets, driven by robust demand. And finally, our operations in Africa continued to perform well. Moving to retail, revenue grew 18% year-over-year on an organic basis. We saw good growth in the UK in both new and used vehicles compared to a pandemic-impacted Q1 2021. However, Record low supply continues to impact our business whilst the order book remains very strong. Note that post the sale of Russia, apart from a small retail business in Poland, the UK is now our only retail market. To summarise the quarter, our overall performance in Q1 has been strong and exceeded our expectations. Our globally diversified portfolio and the strengthening momentum of our distribution business underpin these results and our confidence in the outlook for the year as a whole. Let me now hand back to Duncan.