capital markets day 1.00pm thursday 11th may 2017 jaguar ... · building a brand – tv campaign ....

Capital Markets Day 1.00pm Thursday 11th May 2017 Jaguar Land Rover West London

Welcome Andy Bruce

Agenda

Welcome and introduction AB Q1 trading update RG Strategy overview AB Case studies of acquisitions NM Customer experience strategy overview AB People AS Technology AQ Brand / Marketing HO Operational excellence AR Macro and outlook AB/NM Q&A

Q1 trading update Robin Gregson

Quarter one trading update 11 May 2017

Strong performance with continued improvements in all areas of the business

§  UK new car market increased by 6.2%

§  New retail increased by 3.6%

§  Fleet increased by 8.7%

§  New car volumes increased by 7.4%

§  Retail up 9.2% and fleet up 5.1%

§  New car gross profit increased by 17%, 6% LFL

§  Increased profit per unit margin for both retail and fleet


§  Used car market continues to be buoyant

§  Used car gross profit increased by 23%, 17% LFL

§  Further growth in high margin aftersales business

§  Turnover increased by 17%, 8% LFL

§  Gross profit increased by 18%, 9% LFL


Outlook

§  Good start to the year

§  Strong balance sheet with lower net debt to EBITDA

§  Significant headroom in bank facilities provides additional funding capacity

§  Maintain view that results will be in line with management expectations

Our Strategy

Right Brands, Right Locations

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Concentrate on key scale partnerships

Why these Brands?

§  High new car GP per outlet

§  Drives used car and aftersales opportunity

§  Costs dissipated over higher GP base

Retail Sales Per Outlet 2016

Manufacturer Number of Sales Points*

Retail Registrations

Average Retail Registrations

per Sales Point Fleet

Registrations Average Fleet Registrations

per Sales Point Total Sales

Average Total Registrations

per Sales Point

Audi 115 85,100 740 92,204 802 177,304 1,542

Mercedes Benz 125 76,700 614 93,127 745 169,827 1,359

Volkswagen 191 99,411 520 107,617 563 207,028 1,084

BMW 146 66,210 453 116,383 797 182,593 1,251

Land Rover 118 46,251 392 33,287 282 79,538 674

Nissan 195 74,574 382 77,951 400 152,525 782

Vauxhall 344 114,154 332 136,798 398 250,952 730

Ford 481 147,329 306 170,987 355 318,316 662

Porsche 36 10,592 294 2,505 70 13,097 364

Skoda 128 36,798 287 43,574 340 80,372 628

Transformed Portfolio - Total Group

2011 2017 % change

Outlets 124 153 +9

Total Turnover 1.75bn 4.84bn +176

Turnover per Outlet 14.2m 31.7m +123

Total GP 191m 469m +146

GP/ Outlet 1.54m 3.07m +99

PBT* 19.9m 83.1m +317

PBT per Outlet 160k 543k +239

* Total dealership profit before tax excludes central costs, leasing, divisional costs etc.

Transformed Portfolio - Volume Brands

2011 2017 % change

Outlets 99 104 +5

Total Turnover 1.28bn 2.44bn +91

Turnover per Outlet 12.9m 23.5m +82

Total GP 133m 229m +72

GP/ Outlet 1.34m 2.2m +64

PBT 2.85m 32.5m +1,004

PBT per Outlet 28.8k 312.5k +985

Transformed Portfolio - Premium Brands

2011 2017 % change

Outlets 25 49 +96

Total Turnover 476m 2.4bn +404

Turnover per Outlet 19m 48.9m +157

Total GP 57.8m 240.4m +316

GP/ Outlet 2.3m 4.9m +113

PBT 17m 50.6m +198

PBT per Outlet 680k 1.03m +51

Acquisition Case Study Nigel McMinn

Case Study: Drayton Group

Drayton Group

§  Acquired September 2016 for £55m

§  Stoke, Stafford, Shrewsbury, Stourbridge, Wolverhampton, Walsall and Worcester

§  Private family owned business with long term professional management

§  Right brand in right locations

§  Maintain stability through leadership

§  One MB division defining best practice

§  Invested in management

§  Integrated into group systems and controls

§  Increased available stock and more powerful marketing

§  Group supplier deals

Drayton Group

2015 2017Budget

Staffnumbers 412 500

TotalDirectCost(inc'Indirects') £25,251,527 £29,663,868

Drayton Group

2015 2017Budget

Turnover £276,526,030 £370,241,331

Newretailvolume 3,235 4,143

Newtotalvolume 7,227 9,162

Usedretailvolume 3,325 4,178

AJersales(orService)turnover £24,702,501 £29,941,982

Drayton Group

2015 2017Budget

NetProfitBT £5,224,453 £7,779,818

Case Study: Lomond Audi

Lomond Audi

§  Acquired May 2012 for £15m

§  Glasgow, Edinburgh, Stirling and Ayr

§  Private family owned business – sponsored VWG retailer

§  Right brand in right locations

§  Invested in people

§  Sales people, technicians and management

§  Expanded and upgraded physical capacity

§  Improved calibre of leadership

§  More robust systems and processes

§  Group supply deals

Lomond Audi

2011Actual 2017Budget

Staffnumbers 330 523

DirectCosts £11,667,633 £17,470,582

IndirectExpenses £7,723,046 £11,850,249

Lomond Audi


Turnover £171,199,749 £362,437,732

Newretailvolume 2,571 5,520

Newtotalvolume 3,912 7,634

Usedretailvolume 1,283 4,921

ServiceLabourSales £4,841,311 £9,666,255

BodyshopSales £1,242,722 £3,138,566

PartsTurnover £4,210,816 £9,605,749

Lomond Audi


Netprofit £655,927 £6,621,375

Our Strategy

Why?

Same cars Same price Same premises

Our Strategy

People Andrew Stephenson

Andrew Stephenson: An Introduction

Building a meaningfully and noticeably different experience for our people and our customers…

Customer satisfaction and engagement

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Engagement

We understand how to drive engagement…

Improved Communication

Improving Leadership Capability

Improved Resourcing

Improved Benefits

Engagement

Results starting to show…

IT Attiq Qureshi

Attiq Qureshi: An Introduction

Technology

“it matters a lot now”

Customers are won and loss on the battleground of experience… powered by People & Technology Every measurement shows an explosion in the demands for tools and technology…all driven by customer demands for “seamless multichannel experience” In past 3 years we have seen §  600% growth in data across our network §  500% increase in wireless devices (both our own and customers) §  Doubling of emails sent and received §  Video engagement with customers go from zero to over ten thousand a month §  Online research grew to more than 80% of all customers (approx. half using multiple devices)

Lookers Technology response “aim for excellence”

Fix&Maintain

OpXmise

Transform

ü  Keep pace with demand ü  Replace legacy equipment ü  Security & compliance ü  IT Service management

ü  Economies scale ü  Automation (RPA) ü  Consolidate solutions ü  Integrate Acquisitions ü  Roll out best practice

Best in Class ü  Online solutions ü  Enquiry management ü  Contac centre solutions ü  CRM ü  Mobility ü  Collaboration tools

Lookers Online “own our own online experience”

§  Online platforms are a core part of the customer experience §  We are building more than just a web site

§  Merchandising §  Stock feeds §  Enquiry management §  Integrations to 3rd party tools (optimising images, video, pricing, finance quoting & desirability)

§  Building it with Equator & EPAM on technology platforms of Site core and ADAM §  Ready Q3, launch Q4 2017 - but that’s only just the start

Lookers Online “Customer centric”

§  Full customer focus group and UX testing undertaken to ensure it was designed in way customers wanted

§  Flexible and versatile to meet changing customer needs §  Not just response but responsive plus… mobile versus tablet Android

versus IOS §  Optimised for both new and returning visitors

Lookers Online “New unique search Experience”

§  Search by brand/model (free text) §  Search vehicle category/type §  Make use of our selection tool

§  Icons that means something to customers

§  New, nearly new and used available in the same search

Lookers Online “New unique search experience”

§  Multi brand & make §  Easy navigation and fine tuning of

search criteria and applied filters

§  Easy click through to industry reviews for qualification & reassurance

Lookers Online “personalised”

§  Place for customers to save, transact and self administer

Lookers Online “what next 2018-2019”

§  Integration MyLookers (online service booking) §  Full 2 way CRM integration (Contact centre, Online & then showroom) §  Robotics to offer out of hours queries handling customers §  Reserve a car, deposits, book a test drive, finance quote §  Buy a car – full transaction online

Marketing and Our Brand Heike O’Leary

Heike O’Leary: An Introduction

Marketing Opportunity Animation

Regional Roots deeply embedded with local communities

through meaningful CSR programmes

Big National player with retail locations all over the UK for

greater choice Heritage

proud history of proven success and growth

Real Brand proof points like 'Lookers Approved’ for

extra peace of mind

Expertise helping customers to make the

right choice

Value driven business warm and compassionate

Full Lifecycle helping people through up’s

and down’s

People First Approach offering and individual and tailored

experience Modern Retailer

with real investment into enabling technology

Why Lookers?

Building a Brand – TV Campaign

Brand Video to be embedded – Matthew Rowe

Building a Brand – TV Campaign Video

Screen shot of big sale ad

The Big Sale – Tactical TV Campaign

The Big Sale – Tactical TV Campaign Video

Marketing and Our Brand

Coordinated campaigns with ROI focus

Operational Excellence Allan Rushforth

Allan Rushforth: Introduction

Bottom 20 Retailers £2.25m Operating Profit opportunity simply by achieving budget

Bo2om20vsBudget Actual Budget Shor9all1 (2) 50 (51)2 202 254 (52)3 (41) 12 (53)4 148 211 (63)5 (100) (34) (66)6 (35) 32 (67)7 (12) 55 (68)8 307 376 (69)9 85 155 (70)10 201 272 (71)11 244 323 (79)12 (33) 59 (93)13 25 120 (95)14 (92) 8 (101)15 (70) 50 (120)16 345 479 (134)17 106 244 (137)18 (230) (1) (229)19 (151) 139 (290)20 113 462 (350)

OpportunityatBudget (2,256)

2016 Used Vehicle Margin £1.1m Gross Profit opportunity by aligning under performers to division average margin

§  Further profit growth via x9 divisions

§  Limited Government regulation

§  Varied manufacturer influence Business momentum & independence around used cars (& Aftersales).

AVolumeDivisionUsedVehicleAverageRetailMargin2016

LocaBon RetailSalesVolume

AverageGrossMargin/Unit G.P.(£000s)

1 538 £1,356 £7292 971 £1,266 £1,2303 1,040 £1,215 £1,2644 949 £1,206 £1,1455 1,195 £1,014 £1,212

Ave 727 £953 £6926 867 £909 £7887 571 £857 £4898 610 £848 £5179 616 £825 £50810 509 £819 £41711 639 £807 £51512 808 £561 £45313 391 £528 £20614 470 £467 £219IncrementalIncomeatAverageMargin £1.1million

Actions to improve underperformers Increasing used vehicle margins

§  Customer experience

§  Sales processes

§  Used vehicle stock management -  Time to market -  Number, quality & description of web images -  i-control usage -  Market pricing in ‘real-time’ -  Aged stock control

Divisional Cost Base example £600k cost saving opportunity by aligning under performers to divisional average

APremiumDivisionServiceDepartmentalCostsasPercentageofGrossProfit2016

LocaXon GrossProfit(£000's) DC/GP% DirectCosts(£000s)

1 £862 52.6% £4532 £1,054 56.8% £5993 £1,739 65.4% £1,1374 £1,059 70.2% £7435 £1,245 71.0% £8846 £953 72.9% £695

Ave £1,200 74.3% £8927 £580 79.5% £4618 £1,347 81.5% £1,0989 £1,686 89.9% £1,51510 £1,474 90.5% £1,334

ExpensesavingataverageDirectCostPercentage £628k

Actions to improve underperformers

§  Reducing Direct Costs -  Pricing & direct/semi-variable cost control -  Mid-period review of supplier agreements -  Brand ‘balanced scorecard’ & retained margin -  Scale, capacity & retail business model selection -  Right people, roles & costs

§  Increasing Gross Profit

-  Align capacity of departments to market opportunity -  Increase Aftermarket penetration -  Customer retention - Service Plan pen. growth from c.37% -  Upsell - video & social media use at Service & MOT

Q1 Direct Costs Progress Core business Gross Profit growth leads to a 2.2% DC/GP reduction

55.0%

42.0%

57.2%

44.2%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

DC/GP DC/GPNetofVariableCosts

Q12017

Q12016

Summary Aftersales & Used Cars drive increased profitability

§  Improved Operating Profit

-  Reducing performance dispersion & controlling costs -  Scale economies/regional synergies

§  Rigorous performance management drives incremental revenue

Outlook Andy Bruce and Nigel McMinn

Market outlook

For reference, PwC forecast a market of 3.3million in 2022 (also pre-Brexit) which we consider to be over-optimistic.

“Our last forecast for the UK was produced pre-Brexit, but whilst Brexit introduces some short-term uncertainties, we see no reason to revise the general trend of modest growth 2025. We do not see any factual evidence to support the suggestions that mobility and car-sharing initiatives will have a significant impact on the total volume of car sales.”

Source: Steve Young, Managing Director ICDP

How will customers buy cars?

“Although online research is close to universal, car buyers also value aspects of the physical buying process, and the number of dealer visits for a new car purchase is slowly increasing. This possibly reflects a perceived improvement in the face-to-face experience or more complexity in the buying decision (car technology, new features, finance deals) this is the most easily resolved face-to-face)”


Future of retail

“The large UK dealer groups arguably represent best practice globally in automotive retail. They operate in an intensely competitive environment, but have found scale benefits in a number of areas – critically including digital marketing – and are working harder than their peers elsewhere on improving the quality of staff.”

“The future of automotive retailing is not purely digital – it is omni-channel, combining multiple channels in a flexible way to meet individual customer needs. OEMs and smaller dealers lack the skills and scale to satisfy this requirement, whereas large, professional groups can span the range of needs more effectively.”


Strong market fundamentals: New NewcarregistraBongrowth

0

1,000,000

2,000,000

3,000,000

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

§  Car sales track population growth and GDP

Strong market fundamentals: Used

83

Average age of used vehicles Used vehicle market

Source:StaXsta.comSource:SMMTandDVLAData

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

Newcarmarket Usedcarmarket

Strong market fundamentals: Aftersales

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

2014 2015 2016 2017Predicted

UKVehicleParcAge(years)0-3

Age(years)4-6

Age(years)7-9

Age(years)10-12

+3%

Monthly movements 3 years 60,000 miles

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

January February March April May June July August September October November December

2017 2016 2015 SeasonalAvgto2013

*Source: cap hpi

Trade disposal

£3,700

£3,800

£3,900

£4,000

£4,100

£4,200

2015 2016 2017

AverageSalePrice

94.20%

94.40%

94.60%

94.80%

95.00%

2015 2016 2017

CapClean%

103.00%

103.50%

104.00%

104.50%

2015 2016 2017

SIV%

0%20%40%60%80%100%

2015 2016 2017

SoldFirstTime%

Source: BCA

FordVW

Vauxhall

RenaultNissan

400

800

1200

1600

2014 2015 2016 2017Q1

Margin/unitGBPUsed margin per unit over time – volume brands

Ford VW Vauxhall RenaultNissan

Audi

JLR

Mercedes

400

800

1200

1600

2000

2400

2014 2015 2016 2017Q1

Margin/unitGBPUsed margin per unit over time – premium brands

Audi JLR Mercedes

FCA

§  Media coverage suggests issues with credit bubble and unfair practices

§  Point of sale finance has simply replaced personal loans

§  Finance entirely provided by car manufacturers

§  Rigorous sales process for eligibility and affordability

§  Default rate negligible - no subprime product

§  Hand back rate due to negative equity less than 5%

Growth by acquisition

§  Highly fragmented sector

§  Drivers of consolidation stronger than ever

§  Complete clarity on acquisition criteria

§  Balance sheet and cashflow strength to enable growth

OntheagendaslidepleasechangeIMShighlightstoQ1TradingUpdateOntheholdingslidenextpleasechangeIMStoQuarter1TradingUpdate.Pleasemoveslides8and9withthefinancialdatatoappendices.


Drivers of consolidation

§  Investment demands of manufacturers

§  Lack of succession

§  Regulation and compliance

§  Increasingly favours scale players


Acquisition criteria

§  Right brands

§  Right locations

§  Minimum 15% ROI at PBT level

Acquisition history

VRS

Lomond Group

Chipperfield Land Rover

Canterbury Mercedes smart

Benfield Motor Group

Amersham Jaguar

Knights BMW

Drayton Mercedes-Benz

AMERSHAM

Total Acquisition cost £188m

2017 Forecast £37.2m

ROI 19.8%

Summary

§  Consistent track record of EPS growth

§  Macro environment supports further organic growth

§  Confident that change will be an advantage

§  Self help measures will accelerate this

§  Significant consolidation opportunities will drive growth by acquisition

§  Healthy balance sheet and strong cashflow enables this

§  Balanced attitude to debt

Appendices

Turnover by business segment year ended 31 December 2016

2016 £m

2015 £m

% change 2016 £m

2015 £m

% change

TURNOVER GROSS PROFIT

New Cars 2,206 1,835 20% New Cars 161 145 11%

Used Cars 1,437 1,212 19% Used Cars 105 90 17%

Aftersales 365 319 14% Aftersales 166 141 18%

Parts Division 193 219 NC Parts Division 55 62 NC

Leasing and other 80 64 25% Leasing and other 17 14 21%

TOTAL TURNOVER 4,281 3,649 17% TOTAL GROSS PROFIT 504 452 12%

LFL TURNOVER LFL GROSS PROFIT

New Cars: retail 1,375 1,277 8% New Cars: retail 135 130 4%

New Cars: fleet 831 736 13% New Cars: fleet 26 26 -

Used Cars 1,437 1,341 7% Used Cars 105 98 7%

Aftersales 365 337 8% Aftersales 166 153 9%

0

50

100

150

200

2012 2013 2014 2015 2016

Consistent Financial Track Record 2012 to 2016

£m

GroupPre-taxProfitTrend

£m

GroupNetAssetsTrend

£m

GroupNetDebt

0

20

40

60

80

2012 2013 2014 2015 2016

36.8

48.1

65.0

72.1

77.1

0

100

200

300

2012 2013 2014 2015 2016

204

228

255

298 342

48

43

51

161.7

74.1

capital markets day 1.00pm thursday 11th may 2017 jaguar ... · building a brand – tv campaign ....

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