Acquisition of Musa Motors, Russia - Inchcape

Acquisition of Musa Motors, Russia
André Lacroix
Group Chief Executive
Barbara Richmond
Group Finance Director
24 th April 2008

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Highlights
• Acquisition of Musa Motors Group, one of Russia’s largest car
retailing groups, based in Moscow
• Provides Inchcape with a significant scale position in Moscow
with 16 sites with key global OEM brand partners
• Earnings enhancing in 2008*
• Complements existing Russian operations and provides
platform for further growth
• 2009 combined Russian revenue expected to reach £1bn.
Delivering on our Emerging Markets strategy
*This statement is not intended to constitute a profit forecast for the financial year ended 31 December 2008 or for any other period. In addition,
this statement should not be interpreted to mean that earnings per share (before any one-off costs and amortisation of intangible assets) will
necessarily be greater than those for the relevant preceding financial period. 3

Transaction rationale
• Russia is a core market for Inchcape:
• High growth market (+ >60% in 2007, foreign brands)
• Scale sites
• Strong profit margins
• Provides immediate, significant scale to existing Inchcape
operations
• Broadens premium brand coverage
• Professional management team
• Springboard for next stage of growth
Acquisition provides scale platform in Moscow to increase
Group’s exposure to continued strong Russian growth
4

Musa Motors – a scale acquisition
• One of the largest, customer-focused retail groups in
Russia with high quality sites
• 2007 revenue US$597m, EBITDA $24.5m
• Units sold 13,281* units in 2007
• Q1 2008 new cars sold 3,222, +52.8% YoY
• 16 retail centres
• Strong pipeline of new retail developments
• Represents 10 franchises, focused on premium brands:
BMW, MINI, Rolls-Royce, Volvo, Jaguar, Land Rover, Chrysler, Jeep, Dodge,
Renault
* New and Used cars
5

Acquisition consistent with strategy for
Russia
• Build scale, multi-brand Retail operations in St
Petersburg
• Gain strong, multi-brand Retail presence in Moscow
• Exploit regional opportunities
6

New car sales volume and OEM ranking
2006
2007
% Growth
OEM ranking
in Russia
BMW
812
1,187
46
2
MINI
151
223
48
2
Rolls-Royce
13
27
108
Solus
Volvo
1,920
3,029
58
2
Jaguar
273
273
-
1
Land Rover
1,142
2,154
89
2
Chrysler Jeep
Dodge
844
968
15
1
Renault
4,062
4,073
-
3
Increased focus on premium brands
7

Musa Motors – 2007 results
Revenue
Rolls Royce
3%
Other
4%
US$m
Chrysler Jeep
Dodge
7%
Renault
10%
Land Rover &
Jaguar
31%
Sales
EBIT
EBITDA
597.4
23.1
24.5
ROS (%)
3.9
BMW&MINI
20%
Volvo
25%
Multi-brand scale retail operation with sustainable margins
8

Musa Motors – strong & growing retail group
• 16 retail centres, located in or around Moscow:
• 13 3S centres in Moscow
• 2 showrooms in Moscow
• 1 showroom in St Petersburg
New retail centres and significant refurbishments planned:
• New BMW and Land Rover 3S retail centres opened in Moscow, March 2008
• Relocation of 3S Moscow retail centres for Jaguar, Land Rover, Renault and
Volvo to increase capacity in 2009. Site also has space for two additional
retail centres (US$ 77m).
• Two additional 3S retail centres (US$ 49m) due to open in 2009, including
1 BMW
• One new multi-franchise bodyshop (US$ 6m).
• Planned floor space increase from current 34,011m 2 to 96,124m 2
by end 2009
9

Retail centres - existing and planned
2006
2007
2008
2009**
BMW
3S*
1
1
2
3
MINI
Show room
1
1
1
1
Rolls-Royce
Show room
1
2
2
2
Volvo
3S
1
2
2
2
Jaguar
3S
2
2
2
2
Land Rover
3S
2
3
4
4
Chrysler Dodge
Jeep
3S
2
2
2
2
Renault
3S
1
1
1
1
Additional centres
3S
-
-
-
3
TOTAL***
11
14
16
20
* 3S = sales, service and spare parts retail centre
** 2009 includes relocation of 4 sites (Volvo, Jaguar, Land Rover, Renault) to larger premises
*** Excludes JV with 1 3S facility located in Nizhniy Novgorod 10

Sustainable growth momentum in Russia
• Foreign brands sales volume:
• 1.6 million units in 2007, up over 60% YoY
• Q1 2008 equivalent of 0.46 million units, +54% YoY
• New foreign cars accounted for 15 per cent of total sales in 2003 but are
forecast to account for 78 per cent in 2010
• Car penetration less than half that of Developed markets
Source: Avtostat 11

Inchcape organisation in place to integrate
expansion activities in Moscow and St Pete’s
Inchcape Russia
Musa Motors
Inchcape
Olimp
Inchcape
Independence
Inchcape resources in Russia at completion
• Managing Director
• Chief Financial Officer
• Operations Director including delivery of Inchcape Advantage Programme
• Human Resources Director
• Legal Director
• Business Development Head
12

Inchcape Retail Model will be applied to
deliver value
Invest in profitable
growth opportunities
• Brands
• Sites
• IT Systems
Empowerment
Deliver the best
Customer Experience
• Inchcape Advantage
• Vehicles
• Aftersales
Operational excellence
to maximise
profitability
• Focus on value drivers
• Process improvements
Rewards
Strong
Team
Training
Quality
Innovation
• Product
• Services including F&I
• Processes
13

Phase 1 of Russian expansion now complete
• St Petersburg
• 2 Toyota, 2 Lexus, 1 Audi, 1 Peugeot
• 1 Rolls Royce through Musa
• 8,850 units in 2007
• Significant expansion of Toyota capacity underway
• New Lexus site to be constructed
• Moscow
• 15 retail centres today in Moscow with plans to add 4 retail centres
by 2009
• 2 Toyota retail sites opening in Q4 2008/2009
28 retail centres by 2009
14

A scale business in a fast growing market
Sites
35
30
25
20
15
10
Musa
Independence
Olimp
5
0
2007 2008 2009
2009 revenue in Russia expected to reach £1bn
15

Transaction structure
• 75.1% being acquired in 2008 with payment in two stages
- Down payment of US$200m on completion
- Further payment in 2009 based on 2008 EBIT less
acquired debt, capped at $250m
• 24.9% to be acquired early 2011
- Final payment in 2011 based on 2010 EBIT, capped at
US$250m
• Completion subject to approval of regulatory authorities in
Russia
16

Expected financial effects
• Immediately earnings enhancing*
• Satisfies Group IRR criteria
• Financed from within Group’s existing debt facilities
• Tangible assets as at 31 December 2007:
- US$59m of property at current market value
- US$23m of working capital
*This statement is not intended to constitute a profit forecast for the financial year ended 31 December 2008 or for any other period. In addition,
this statement should not be interpreted to mean that earnings per share (before any one-off costs and amortisation of intangible assets) will
necessarily be greater than those for the relevant preceding financial period. 17

Inchcape now a powerful force in Russia
• Acquisition increases Inchcape’s total market share
in the fast growing Russian market
• Powerful bases now established in the two major
cities in Russia which together account for 51%* of
the foreign brand car market
• 2009 combined revenue in Russia expected to reach
£1bn
• Excellent platform from which to expand into the
regional markets
Delivering on our Emerging Markets strategy
* Source: Avtostat 18