Industry leader - Inchcape

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06Inchcape plc Annual report and accounts 2006Group Chief Executive’s reviewcontinuedStrengthenIn strengthening the business our goalis to increase the profitability of everysingle operation in every single country.Thus we are seeing an increased focuson the customer to drive like for like salesgrowth and on operational excellenceto drive like for like profit growth.The former is being driven byour long term, Group-wide programme,Inchcape Advantage designed to codifythe way we deliver an outstandingcustomer experience every day, everytime, everywhere and at each stage ofthe customer journey. We are introducinga new suite of customer focusedstandards, finding ways to share bestpractice across the Group and triallingnew and innovative ways to deliver aspecial customer experience. We wantto give an advantage to our brandpartners by being the best distributor orretailer of their brand.In our push for like for like tradingprofit growth, we are increasing our focuson achieving operational excellencefrom our value-drivers: vehicles, serviceand parts.ExpandI am equally excited by our expansionagenda. We plan to invest significantlywith our core brand partners indeveloped and emerging markets.We will accelerate our Retail expansion,develop new Distribution opportunitiesand create four additional scale marketstaking our core markets from six to tenover the next five years.In developed markets we will continueto play a leading role in the industryconsolidation to increase our share ofthe national volume with our core brandpartners. The management of fewer,bigger, better retail sites is leading, asexpected, to improved retail standardsfor the customer and creates scalevehicle and aftersales operationsfor us, enabling investment in strongmanagement and infrastructure togenerate higher returns.As our brand partners pursuetheir expansion plans in the high growthemerging markets, they are immediatelydeveloping first class retail networks,learning from and leapfrogging thedeveloped countries experience to buildfewer, bigger and better retail sites withworld-class retail standards. They thereforeneed strong and professional retailpartners with significant financial capacityto develop their retail network in thesemarkets. We are well placed to takeadvantage of these opportunities andit is our intention to increase our retailpresence in Romania, Bulgaria, Latvia,Estonia and Lithuania.In terms of new markets, we arenow creating scale operations in bothRussia and China.Russia’s car market is the largestin Central and Eastern Europe and isexperiencing rapid growth. In recentyears foreign brands’ share of overallsales in Russia have been increasingstrongly with a 65% increase in salesin 2006 to over one million units.In January 2007 we completed ouracquisition of a 75.1% shareholdingin the Toyota/Lexus retail and servicebusiness of Axel Car in St Petersburg,the first step in our expansion strategyfor this high growth market.We have also announced plansto enter the Moscow market througha joint venture with the IndependenceGroup of Companies, one of Moscow’sleading independent car retailers, toestablish two Toyota retail and servicecentres in Moscow. These retail centresare expected to open in 2008.China is another market whereI see substantial growth for the Group.The market is growing fast and hasovertaken Japan as the second largestin the world, up by 35% in 2006.The construction of our firstToyota dealership in Shaoxing (4.3 millioninhabitants) from a greenfield site wascompleted in December 2006. We havealso been awarded the Lexus franchisefor Shaoxing which will open in the fourthquarter of 2007 as well as the Lexusfranchise for Shanghai, due to openin early 2008.Our peopleI have a strong belief that it is our peoplewho make the difference. We have anenergising Human Resources agendain place around recruitment, motivation,remuneration and training. We employa decentralised but co-ordinatedorganisational model. Our local businessesare empowered and resourced to makefast decisions while the Group enjoysgood synergies based on global bestpractice and consistent standards.
07Inchcape plc Annual report and accounts 2006The next stage of growthI believe that Inchcape has tremendousgrowth opportunities; I expect ourstrategy to deliver a healthy balancebetween like for like profit growth andacquisition expansion.Our formula for deliveringexceptional shareholder returns isvery compelling.Our business platform isexceptionally strong. Our model isunique in the automotive industry with abalanced geographic spread betweendeveloped and emerging markets.We enjoy market leadershippositions in key markets with best-in-classmargins. And we have enduringrelationships with winning brand partnerssupported by a strong and professionalmanagement team.Added to this, our performancetrack record is outstanding. Our existingportfolio is highly cash generative andevery market has contributed to the lastfive years’ profit growth.With our clear strategic focus wewill seize major growth opportunities bothorganically and through acquisition.We have good financial flexibility anda solid track record of both successfullyintegrating acquisitions and driving thebusiness forward organically.This is why we are leading theindustry as an independent, internationalautomotive retailer and we are excitedabout the growth opportunities aheadfor our shareholders, brand partnersand our people.“An outstanding customerexperience, deliveredconsistently, will generatehigher returns from our existingassets, based on higherconversion and loyalty rates.”André LacroixGroup Chief Executive5 March 2007
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Industry leader - Inchcape

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