02<strong>Inchcape</strong> plc Annual report and accounts 2006Chairman’s statementHeadline profit before tax£213.9m +12.4%£m 2006 2005Profit before tax 213.9 177.3Exceptional items – 13.0Headline profit before tax 213.9 190.3Highlights2006 has been another successful yearfor the <strong>Inchcape</strong> Group, delivering strongfinancial, operational and strategicprogress. Group sales have increasedby 7.9% to £4.8bn for the full year 2006benefiting from a combination of organicgrowth and significant acquisitionactivity. Like for like sales increasedby 2.2%. Headline profit before taxand exceptional items of £213.9m was12.4% higher than 2005 and Headlineearnings per share rose 19.8% to 35.7p.To reflect this success and our continuedconfidence for future performance wehave raised the full year dividend by58% to 15.0p per share.We have experienced solidperformances from both our Distributionand Retail segments. In Distributionwe achieved record sales in Europewhere we recovered our market leadingposition in Greece, and in Australia weachieved yet another record marketshare. In the Retail segment sales wereup 15.3% with like for like sales up 3.1%boosted by our focus on improvingour customer service processes andpractices. Our broad geographic spreadand diversity of earnings mitigatedthe softer performances by our Asianbusinesses and helped us achieveanother year of record sales and profitas an automotive group.As well as a continued focuson our core business, we have made anumber of important acquisitions in 2006.In February we expanded our Australianpresence with the acquisition ofKeystar Motors Pty Ltd (Keystar),establishing a retail presence in thefast growing Brisbane market. In Marchwe announced our first entry into theexciting, high growth Russian marketthrough a joint venture with theIndependence Group of Companies,one of Moscow’s leading independentcar retailers. We will open two retail andservice centres in Moscow for Toyota,one of the most successful foreign brandsin Russia, early in 2008. We announcedour second move into the Russian marketin August 2006 with the acquisition of amajority stake in an already successfuland established Toyota and Lexusbusiness in St Petersburg, Russia’s secondlargest market.China is also an exciting marketfor <strong>Inchcape</strong> representing substantialgrowth opportunities. In December 2006we completed the construction of ourfirst Toyota greenfield site in ShaoxingWe have also been awarded Lexusfranchises in Shaoxing and Shanghai,which we anticipate will begin tradingtowards the end of 2007, early 2008.In the UK consolidation of theautomotive retail market has alsocontinued throughout 2006, as wepredicted. In July 2006 we acquired thescale Lind Automotive Group HoldingsLimited (Lind) business and in December2006 we announced the public offerfor the acquisition of European MotorHoldings plc (EMH). This completed inJanuary 2007. Both these acquisitionsallow us to take a major step forwardin our strategy and create a uniqueforce in the UK automotive retail market.They significantly expand our presencein the south, east and north of Englandand in the premium brand sector, whichis the most profitable and fastest growingpart of the UK market. Looking forward,this creates a platform from which todeliver growth and improved returns,based on fewer, larger scale andstronger relationships with our core brandpartners. We are confident that the endresult will give us the ability to deliversuperior performance both for our brandpartners and our customers.DividendThe Board is recommending thepayment of a final ordinary dividend forthe year of 10.0p (2005 – 6.3p). This givesa total dividend for 2006 of 15.0p, whichis 58% above the 2005 dividend of 9.5p.This growth reflects our continuingconfidence in the business and its futureand is consistent with our stated aimof maintaining a progressive dividendpolicy to shareholders. The full yeardividend is covered 2.4 times by Headlineearnings per share (2005 – 3.1 times).Share buy back and share splitIn May 2006 we carried out a six for oneshare split. Our equity was trading atmore than £29.00 per share, which wascomparatively high for shares traded onthe London Stock Exchange. We felt thatmany shareholders would prefer to dealat a lower price per share and thereforesub-divided each existing ordinary shareinto six new ordinary shares. This furtherincreased liquidity in the stock.The Group has successfullyconcluded its £65.0m share buy backprogramme (2006 – £34m) through thepurchase of 17.9m shares, now heldin treasury, at an average price of£3.64 per share.
03<strong>Inchcape</strong> plc Annual report and accounts 2006Board changesOn 17 September 2006, Graeme Pottsstepped down from the <strong>Inchcape</strong> plcBoard, leaving the Group after four years.During this time he significantly improvedthe performance of our UK businessesand he left us with an excellentmanagement team in place. We wishGraeme the very best in the next stageof his career.PeopleOur goal of being the world’s mostcustomer-centric automotive retailer isenergising everyone within <strong>Inchcape</strong>.As ever, on behalf of the Board, I wouldlike to thank all of our colleagues fortheir hard work, pride and commitmentin delivering the 2006 performance.Trading prospectsThe foundations of our Group are strongand our strategic direction is clear.Our focus on improving the customerexperience and driving operationalexcellence makes us well placed todeliver continued organic growth thisyear. This, together with the benefitof the acquisition of EMH from29 January 2007, the full year effect ofthe Lind acquisition, and our entry intothe high growth markets of Russia andChina, mean we look forward to 2007with confidence.“2006 has been anothersuccessful year for the<strong>Inchcape</strong> Group, deliveringstrong financial, operationaland strategic progress.”Peter JohnsonChairman5 March 2007