REG - Inchcape PLC - Half-year Report
28/07/2022 07:16
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RNS Number : 0052U Inchcape PLC 28 July 2022
Inchcape plc, the leading independent global automotive distributor, announces
its half year results for the six months to 30 June 2022
Strong first half; executing on our strategic priorities
Duncan Tait, Group CEO, commented:
"Inchcape has had a great first half. Continued strong consumer demand and
fantastic execution from our teams has driven growth in revenue, profit and
cash. We've also made excellent progress with the two strategic growth
priorities of our Accelerate strategy. Firstly, we have continued to extend
our global leadership in automotive distribution, adding new OEMs through
acquisitions and contract-wins, and invested further in digital and data
analytics - a key differentiator that is driving growth. Secondly, we are
making progress on capturing more of a vehicle's lifetime value with the
rollout of bravoauto, and will be launching the platform in several markets in
the second half.
Today's announcement of the acquisition of Derco, the largest independent
automotive distributor in Latin America, is an important milestone in the
execution of this strategy. It provides a step-change in the scale of our
distribution business and increases our exposure to the highly attractive,
fast growth region of Latin America.
With a clear strategy, driven by our ambition to be both better and bigger,
Inchcape is well positioned to capitalise on further opportunities for organic
growth and market consolidation, and I am confident we will continue to
deliver sustainable long term value for all our stakeholders."
Financial highlights (stated on the basis of continuing operations)
§ Group revenue of £3.9bn: up 12% on an organic basis and 8% reported
§ Adjusted PBT of £184m (1H21: £121m), driven by topline growth and
improved operating margins
§ Statutory profit before tax of £188m (1H21: £33m), reflects a small gain
(£3m) from adjusting items
§ High cash generation, 1H22 free cash flow of £224m, improved our net cash
position (£439m) post M&A and cash-returns
§ Cash returns: interim dividend of 7.5p (2021 interim: 6.4p); £50m share
buyback completed in July
Strategic highlights
§ Accelerate strategy, executing on two exciting growth pillars: Distribution
Excellence and Vehicle Lifecycle Services (VLS)
§ Proposed acquisition of Derco accelerates the growth of our global
distribution footprint (see separate announcement)
§ Broadening OEM footprint: added Porsche, Volvo and JLR in Chile (Q2), and
expanding in Ecuador with Geely (2023)
§ Exited Russia: disposed of our remaining Retail-only business in Russia to
local management in Q2
§ Accelerated our digital adoption: rolled-out omnichannel capability (DXP),
now live in 31 OEM markets (Dec-20: one)
§ VLS: further roll-out of bravoauto, a multi-brand digital-first used car
platform, to commence in the second half
Outlook:
Our 2022 outlook remains unchanged from our update on 16 June 2022. Based on
the performance to date and our expectation for the second half, with an
improved outlook for vehicle supply and robust demand, we expect to deliver
FY22 adjusted PBT from continuing operations between £350m and £370m at
prevailing exchange rates.
The strength of our business model and financial position means Inchcape is
well placed to continue to grow profits and generate cash, and we are
confident in the medium-term outlook set out at the Capital Markets Day in
November.
1H22 1H21(1) % change % change % change
reported
constant FX(2)
organic(3)
Key financials (continuing operations)
Revenue(1) £3,890m £3,588m +8% +9% +12%
Adjusted Operating Profit(2) £204m £137m +49% +49%
Adjusted Operating Margin(2) 5.2% 3.8% +140bps +140bps
Adjusted Profit Before Tax(2) £184m £121m +53%
Adjusted Basic EPS(2) 35.0p 21.8p +60%
Dividend per share 7.5p 6.4p +17%
Free cash flow(2) £224m £174m +29%
Statutory financials
Operating profit (continuing operations) £207m £49m
Profit before tax (continuing operations) £188m £33m
Total (loss) / profit for the period £(100)m £19m
Basic EPS (continuing operations) 36.2p (0.2)p
1. Restated to adjust for disposal, during 2Q22, of the remaining business
in Russia (classified as a discontinued operation), see note 1
2. These measures are Alternative Performance Measures, see note 17
3. Organic growth is defined as revenue growth in operations that have been
open for at least a year at constant foreign exchange rates
Market abuse regulation statement
This announcement contains inside information.
Results presentation today
A virtual presentation for analysts and investors will be held today, Thursday
28th July, at 08:30 (UK time). To register please follow this link:
https://openexc.zoom.us/webinar/register/WN_lsimiu4ZQNiZZItK8pvtTA
(https://urldefense.com/v3/__https:/openexc.zoom.us/webinar/register/WN_lsimiu4ZQNiZZItK8pvtTA__;!!Cx6w5kGySA!x9riuQ9NPIkxW-GFw8soP30Z5qhymcz1MXMhzKhYNBOcFC-aaKHq2UTphOLiz1SRDCYgJYP2ll75wW_qMfjJP3-X3AjkXE0q7A$)
A replay of the presentation will be available via the Company's website,
www.inchcape.com (http://www.inchcape.com) .
Financial calendar
Ex-dividend date for 2022 interim dividend 4(th) August 2022
Q3 trading update 27(th) October 2022
Contacts
Inchcape plc:
Raghav Gupta-Chaudhary Investor queries +44 (0)7933 395 158 investors@inchcape.com (mailto:investors@inchcape.com)
Finn Lawrence Media queries +44 (0)20 7546 0022
Media enquiries (Brunswick Group):
Kate Holgate / Helen Smith +44 (0)20 7404 5659 inchcape@brunswickgroup.com (mailto:inchcape@brunswickgroup.com)
About Inchcape
Inchcape is the leading independent multi-brand global automotive distributor,
operating in over 40 markets and territories with a portfolio of the world's
leading automotive brands. Inchcape has diversified multi-channel revenue
streams including sale of new and used vehicles, parts, service, finance and
insurance. The Company has been listed on the London Stock Exchange (INCH)
since 1958, and is classified within the 'Business Support Services' sector.
The Group is headquartered in London and employs around 14,500 people
globally. www.inchcape.com
(file:///C%3A/Users/finn.lawrence/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/QNPKNXC8/www.inchcape.com)
.
Our results are stated at actual exchange rates. However, to enhance
comparability we also present year-on-year changes in revenue and adjusted
operating profit in constant currency, thereby isolating the impact of
translational exchange rate effects. Unless otherwise stated, the commentary
below is expressed in constant currency and before adjusting items.
Following the disposal of our remaining Retail-only business in Russia
(Moscow), all figures quoted in the 'Operational' and 'Operating and
financial' reviews are on a 'continuing operations' basis and therefore
exclude any contribution from Russia in 2022. However, while the comparative
period (1H21) excludes the contribution from the Moscow operation, it does
include c.£110m of revenue and c.£10m of profit from the St. Petersburg
operation (disposed towards the end of 2Q21).
Operational review
Key performance indicators
1H22 1H21(1) % change % change % change
reported constant FX(2) organic(3)
Revenue £3.9bn £3.6bn +8% +9% +12%
Adjusted Operating Profit(2) £204m £137m +49% +49%
Adjusted Operating Margin(2) 5.2% 3.8% +140bps +140bps
Adjusted Profit Before Tax(2) £184m £121m +53%
Free cash flow(2) £224m £174m +29%
Return on capital employed(2) 35% 22%
1. Restated to adjust for disposal, during 2Q22, of the remaining business
in Russia (classified as a discontinued operation), see note 1
2. See note 17 for definition of Alternative Performance Measures
3. Organic growth is defined as revenue growth in operations that have been
open for at least a year at constant foreign exchange rates
Performance review: first half 2022
The Group made a great start to 2022, with both distribution and retail
delivering strong revenue growth and margins. The performance was driven by a
combination of robust consumer demand and price-mix tailwinds against the
backdrop of new vehicle supply shortages - which is gradually improving.
Performance of used vehicles continued to be robust, and our aftermarket
business performed well.
In the first half, the Group generated revenue of £3.9bn, adjusted operating
profit before adjusting items of £204m and free cash flow of £224m.
Group revenue of £3.9bn rose 8% year-on-year reported and 9% in constant
currency. The growth rate is supported by the addition of four new
distribution businesses over the past 12 months, including Geely (Chile),
commercial vehicles in Guam and Micronesia, Ditec (Chile) and Simpson Motors
(Caribbean).
On an organic basis, excluding currency effects and net M&A, revenue
increased by 12%, with the strongest performance in the Americas and in
Europe, driven by a combination of continued (albeit still gradual) volume
recovery and price-mix tailwinds.
The Group delivered an adjusted operating profit of £204m, up 49%
year-on-year in both reported and constant currency. The strong rebound
reflects the topline increase and the year-on-year operating margin
improvement.
Adjusted profit before tax (PBT) of £184m (1H21: £121m) reflects the strong
improvement in revenue and operating profit. The net interest expense of £20m
is slightly higher than the prior year due to higher finance costs.
During the first half adjusting items amounted to a £3m gain. This is the net
of a gain relating to pensions (£20m) and expenses owing to asset
amortisation (£10m) and costs related to acquisitions (£7m).
The highly cash-generative nature of our business model was evident with free
cash flow generation of £224m (1H21: £174m). In addition to the improvement
in profitability, during the period we benefitted from a net working capital
inflow of £80m, arising primarily as a result of lower net inventories, and a
low level of net capital expenditure (£18m).
Other notable elements of the cash flow bridge include: net acquisitions and
disposals, which amounted to an outflow of £110m (acquisitions of Ditec,
distribution of Porsche, Volvo and JLR in Chile, and Simpson Motors,
distribution of Suzuki, Mercedes-Benz, Subaru and Chrysler in Barbados and
neighbouring islands, and includes cash disposed as part of the Russia sale)
and dividend payments of £61m. We launched a £100m share buyback programme
in February, of which c.£40m was complete by the end of the period. In view
of the proposed acquisition of Derco, the Board has decided not to proceed
with the second tranche (£50m).
The Group closed the reporting period in a net cash position of £439m
(excluding lease liabilities), which compares to £379m at the end of December
2021, and £435m as at 30 June 2021. On an IFRS 16 basis (including lease
liabilities), we ended the period with net funds of £98m (December 2021: net
funds of £59m).
Return on capital employed based on the performance over the past 12 months
was 35%, compared to 22% for the comparative period. The increase was
primarily driven by the recovery in Group profit, and supported by our
portfolio shift towards Distribution.
Second quarter 2022
Group revenue for the second quarter was £2.1bn, up 10% reported. On an
organic basis revenue increased 10%, compared to a 13% increase in Q1 - the
lower growth rate is primarily owing to the bounce-back in Q2 2021 following
the impact of the pandemic earlier in the year. During the quarter Group
revenue was higher across both new and used vehicles and in aftersales.
In Distribution, revenue increased 16% organically, following an 11% increase
in Q1. The performance was driven by an improvement in new vehicle supply and
a strong aftersales performance.
In Retail, revenue fell 1% an organic basis (Q1: up 18%). While the comparator
in Q2 was more challenging, owing to the post- bounce-back, this was in part
offset by an improvement in new vehicle supply and growth of our bravoauto
business.
Strategic priorities
In 2021 we launched our new strategy, Accelerate, focussing on two growth
opportunities: Distribution Excellence and Vehicle Lifecycle Services.
Distribution Excellence: extending our leadership in automotive distribution
(vehicles and parts)
In the Group's core operations, we create the vital link between OEM brands
and end-customers, with our full-spectrum distribution capability. This
includes deciding which vehicle models and parts to order, the pricing
structure in a market, arranging the importation of vehicles and parts, the
building of the brand including marketing and the provision of finance and
insurance products (FIP), the creation and management of the digital and
physical network, in-market distribution of vehicles and parts for the
aftermarket, and finally, when we choose to operate dealerships ourselves, we
perform retail and aftersales services.
Over the past six months we have made excellent progress:
§ Digital, Data & Analytics is a key enabler of Accelerate, and we are
seeing our focus on this element of our strategy translate into tangible
positive results, which is impressing our OEM partners.
o We have continued to roll-out our omnichannel (DXP) capability, which is
live in 31 OEM markets (Dec-20: one), across 12 brand partners (Dec-20: one).
We are seeing the platform drive better sales conversion rates.
o We have built significant internal analytical capability (DAP), to
leverage our data and drive smarter, faster and better business decisions.
Over the past six months we have developed several algorithms to improve our
Aftersales performance - including analytics relating to ordering of parts and
optimisation of pricing.
o Our two digital delivery centres (DDCs), one in each of Colombia and
Philippines, celebrated their one year anniversary in July, and today have 750
'Inchcapers' working in the centres providing 24x7 solutions and
cost-efficient services to the Group's global operations. The DDCs have
significantly increased our internal digital delivery capability.
Inchcape is already the leading global automotive distributor operating in a
highly fragmented industry, and we are extending this leadership with our
investment in technological capability (digital and data analytics). Our 'plug
and play' distribution platform will help drive both organic and inorganic
growth within our current geographic footprint, with the addition of
complementary brands, and even faster expansion in new markets, with both
existing and new partners.
§ In line with our focus on markets with high growth potential, we continued
to further expand our distribution footprint. These deals leverage our
existing geographic and brand footprint, as well as giving us access to a
number of new brand partners.
o In Chile, a market we have been operating in since 1993, the acquisition
of Ditec added JLR and two brands that are first-time distribution
relationships for the Group: Porsche and Volvo.
o In Ecudaor, a market we have been operating in since 2019, we were awarded
the distribution of Geely vehicles. This follows the excellent performance in
Chile, where we began distributing earlier this year. The contract in Ecuador
will begin in 2023.
Vehicle Lifecycle Services: capturing more lifetime value - of customers and
vehicles
§ We are making progress with the opportunities identified to capture more of
a vehicle's lifecycle value where we believe there is significant untapped
potential, that the Group has not fully realised in the past. During 2021 we
created our new multi-brand, digital-first, used car platform bravoauto, which
we initially launched in the UK, and in the first half of 2022 we have been
readying some of our other markets for the roll-out of bravoauto which will
commence in the second half of the year.
We made great progress with our Responsible Business pillars; hosted Inclusion
& Diversity workshops, partnered with charities to support our
communities, continued to improve our practices and launched a partnership to
support EVs in Singapore.
Capital allocation
Our capital allocation policy remains unchanged: 1) to invest in the business
to strongly position it for the future; 2) to make dividend payments; 3) to
conduct value-accretive M&A; and, in the absence of any opportunities, 4)
consider share buybacks.
Our dividend policy targets a 40% annual payout ratio of basic adjusted EPS
with the interim dividend set at one-third of the prior year's total dividend.
As such, based on the 2021 dividend of 22.5p, the Board has declared an
interim dividend of 7.5p (1H21: 6.4p). We launched another £100m share
buyback programme in February, of which we have completed £50m. In view of
the proposed acquisition of Derco, the Board has decided not to proceed with
the second tranche (£50m).
Investment proposition
Inchcape is the leading global automotive distributor. Combining our exposure
to higher growth markets and diversified revenue streams, with our history of
market outperformance, we expect to deliver strong organic growth. By
leveraging our scale, operational improvements and focus on higher margin
activities, we can drive margin expansion. The highly fragmented nature of
distribution, and our strong financial position, also provides significant
consolidation opportunities.
In addition to the attractive growth prospects, the business is asset-light
with excellent financial characteristics: high returns and cash conversion.
Combined with a disciplined approach to capital allocation we believe these
should enable the Group to maintain its long track record of delivering
significant value through organic growth, consolidation and attractive
shareholder returns.
Looking ahead
Our 2022 outlook remains unchanged from our update on 16 June 2022. Based on
the performance to date and our expectation for the second half, with an
improved outlook for vehicle supply and robust demand, we expect to deliver
FY22 adjusted PBT from continuing operations between £350m and £370m at
prevailing exchange rates.
The strength of our business model and financial position means Inchcape is
well placed to continue to grow profits and generate cash, and we are
confident in the medium-term outlook set out at the Capital Markets Day in
November:
§ Distribution Excellence: mid-to-high single digit profit CAGR plus M&A
§ Vehicle Lifecycle Services: >£50m of incremental profit
Operating and financial review
Distribution
The Distribution segment reported revenue of £2.7bn increasing 16%
year-on-year, with a particularly strong performance in both the Americas and
in Europe. The combination of an encouraging topline and margin improvement
resulted in an adjusted operating profit(1) of £174m (1H21: £120m). The
adjusted operating margin(1) rose 120bps to 6.3%.
1H22 1H21 % change reported % change constant FX % change
organic
£m £m
Revenue
Asia 532.6 557.1 (4)% (9)% (11)%
Australasia 541.5 571.4 (5)% (5)% (5)%
APAC 1,074.1 1,128.5 (5)% (7)% (8)%
Europe 955.1 737.8 +29% +34% +34%
Americas & Africa 710.0 488.6 +45% +47% +33%
Total Distribution 2,739.2 2,354.9 +16% +16% +14%
Adjusted operating profit
Asia 41.5 52.3 (21)% (24)%
Australasia 30.1 18.2 +65% +66%
APAC 71.6 70.5 +2% (2)%
Europe 39.9 19.8 +102% +108%
Americas & Africa 62.2 29.4 +112% +120%
Total Distribution 173.7 119.7 +45% +44%
Adjusted operating margin
Asia 7.8% 9.4% (160)bps (160)bps
Australasia 5.6% 3.2% +240bps +240bps
APAC 6.7% 6.2% +50bps +30bps
Europe 4.2% 2.7% +150bps +150bps
Americas & Africa 8.8% 6.0% +280bps +290bps
Total Distribution 6.3% 5.1% +120bps +120bps
§ APAC revenue declined 7% year-on-year, and operating profit was down 2%.
While the trading conditions in Hong Kong and Singapore were unfavourable,
better results in other markets and cost-mitigation measures supported our
performance. In the case of Hong Kong, pandemic related restrictions weighed
on our first half results. Our performance towards the end of the half
improved, with vehicle deliveries and aftersales at its highest level for
several quarters. In Singapore our performance was impacted by lower
availability of vehicle licences compared to 1H21, which was helped by the
government's phasing of missed licences (following the 2020 pandemic
restrictions). We nevertheless gained market share and grew our Aftersales
business. We consciously reduced overheads in both markets which helped
mitigate the profit impact. While Hong Kong and Singapore remain significantly
below historic levels, we are confident in how our business is positioned in
both markets and the tailwind it will provide for the region in the years
ahead. The trends across the rest of Asia continue to be encouraging, with
revenue and profit above both the prior year and the second half of 2021. In
terms of our newest distribution businesses (JLR in Indonesia, and commercial
vehicles in Guam), the initial performance of both has exceeded our
expectations. In Australasia, while our topline performance was weighed-down
by lower vehicle supply this was compensated for by improved pricing.
Elsewhere, growth in our Aftersales business and strict cost control helped
drive the profitability increase.
§ Europe revenue was up 34% year-on-year with operating profit rising 108%.
We continued to gain share across our key markets - Belgium, Bulgaria, Greece
and Romania - driven by strong execution, and the popularity of new models,
specifically the Land Rover Discovery and Toyota Yaris Cross. Demand for
vehicles continues to be robust, with record order books across many of our
markets. In terms of vehicle supply, we have seen some improvement although it
remains significantly below normal levels. JLR Poland, our most recent
addition to the region, is tracking ahead of expectations, and started to
benefit from an improvement in vehicle supply towards the end of the period.
§ Americas & Africa revenue grew 47% year-on-year, driving operating
profit up 120%. The Americas delivered strong performance across all major
markets, driven by the combination of robust consumer demand and a lack of
vehicle supply. The comparative period was impacted by some pandemic related
disruptions, which is supporting the growth rate. During the first half we
completed the acquisition of two distribution businesses (Simpson Motors and
Ditec), which will add an aggregate c.£250m of annualised revenue. In Africa,
our performance continues to be solid. Looking further ahead, as we detailed
during our 'In the driving seat: Spotlight on Americas' webinar, given the low
penetration of vehicles per capita in the Americas region, we are optimistic
about the region's growth prospects over the medium and long term.
Retail
Following a significant disposal programme, the Retail segment only includes
the results of the UK and Poland franchise dealerships and our bravoauto
business in the UK.
1H22 1H21 % change reported % change constant FX % change
organic
£m £m
Revenue
UK & Europe 1,151.2 1,233.0 (7)% (6)% +8%
Total Retail 1,151.2 1,233.0 (7)% (6)% +8%
Adjusted operating profit
UK & Europe 30.3 16.9 +79% +83%
Total Retail 30.3 16.9 +79% +83%
Adjusted operating margin
UK & Europe 2.6% 1.4% +120bps +130bps
Total Retail 2.6% 1.4% +120bps +130bps
§ UK and Europe delivered organic revenue growth of 8% and operating
profit(1) rose 83%, resulting in an operating margin of 2.6%. Demand for
vehicles (new and used) remained strong, which against a backdrop of
constrained supply has continued to support vehicle margins. Aftersales was
solid, delivering good growth throughout the period. As indicated at our
Capital Markets Day (17 November 2021), as and when the supply situation
normalises we expect margins will trend towards c.1.5%. The results of the
first half of 2021 include c.£110m of revenue and c.£10m of profit from our
operations in St. Petersburg disposed in 2Q21.
Value drivers
We provide disclosure on the value drivers behind our gross profit. This
includes:
§ Gross profit attributable to Vehicles: New Vehicles, Used Vehicles and the
associated F&I (Finance & Insurance) income; and
§ Gross profit attributable to Aftersales: Service and Parts.
1H22 1H21 % change reported % change constant FX
£m £m
Gross Profit
Vehicles 412.5 324.2 27% 27%
Aftersales 202.8 183.1 11% 11%
Total 615.3 507.3 21% 21%
We operate across the automotive value chain, and during the period we
generated 33% of gross profit through Aftersales, compared to 36% in the first
half of 2021. This reflects the greater gross profit contribution from
vehicles as volumes improved and the benefit from higher vehicle gross
margins.
Other financial items
Adjusting items: In the first half of the year, we have reported adjusting
items representing a gain of £3m (2021: a loss of £88m). The gain comprised
of £20m relating to a change in pensions indexation linkage from RPI to CPI,
partially offset by £10m of accelerated amortisation on software assets and
£7m of acquisition and integration costs. Further details can be found in
note 3 to the interim financial statements.
Net financing costs: Net finance costs were £20m (2021: £16m). The interest
charge is stated on an IFRS 16 basis and, excluding interest relating to
leases, our net finance charge was £15m compared to £11m in 2021.
Tax: The effective tax rate on adjusted profit is 26% (2021: 27%), and on a
statutory basis is 25% (2021: 93%). The effective tax rate on a statutory
basis is not comparable to the prior period since the current year rate
considers only continuing operations and thus excludes the impact of the
Russian disposal whereas in the prior year the rate included the impact of
disposals and restructuring costs.
Non-controlling interests: Profits attributable to our non-controlling
interests were £4m (2021: £3m). The Group's non-controlling interests
comprise a 40% holding in PT JLM Auto Indonesia, a 33% share in UAB Vitvela in
Lithuania, a 30% share in NBT Brunei, a 30% share in Inchcape JLR Europe, a
30% share in Ditec in Chile, a 10% share of Subaru Australia and 6% of the
Motor Engineering Company of Ethiopia.
Dividend: The Board has declared a final dividend of 7.5p per ordinary share
which will be paid on 2 September 2022 to shareholders on the register at
close of business on 5 August 2022. The Dividend Reinvestment Plan is
available to ordinary shareholders and the final date for receipt of elections
to participate is 12 August 2022.
Capital expenditure: During the first half of 2022, the Group incurred net
capital expenditure of £18m (2021: £19m), consisting of £26m of capital
expenditure and £8m of proceeds from the sale of property. In 2022, we expect
net capital expenditure will be less than 1% of sales.
Financing: As at 30 June 2022, the committed funding facilities of the Group
comprised a syndicated revolving credit facility of £700m (2021: £700m) and
sterling Private Placement loan notes totalling £210m (2021: £210m). As at
30 June 2022, none of the £700m syndicated revolving credit facility was
drawn (£nil as at 31 December 2021 and 30 June 2021).
Pensions: As at 30 June 2022, the IAS 19 net post-retirement surplus was
£153m (£82m as at 31 December 2021), with the increase driven largely by a
rise in the discount rate used to determine the value of scheme liabilities,
partially offset by lower than expected returns on scheme assets. In line with
the funding programme agreed with the Trustees, the Group made additional cash
contributions to the UK pension schemes amounting to £2m (2021: £5m).
Discontinued operations: During the period the Group agreed the sale of its
remaining retail-only operations in Russia. In the first half of 2022 the
operations generated revenue of £237m and operating profit of £21m. This has
been classified within discontinued operations. The total loss reported was
£240m, where we realised £99m of accumulated foreign exchange losses upon
disposal.
Our financial metrics
The following table shows the key profit measures that we use throughout this
report to most accurately describe operating performance and how they relate
to statutory measures.
Six months to 30 June 2021
Six months to 30 June 2022 (restated)1
£m £m
Continuing operations
Gross Profit 615.3 507.3
Add back: Adjusting items charged to gross profit - -
Adjusted Gross Profit from continuing operations 615.3 507.3
Less: Segment operating expenses (411.3) (370.7)
Adjusted Operating Profit from continuing operations 204.0 136.6
(Less) / add: Adjusting items 3.3 (87.5)
Operating Profit 207.3 49.1
Less: Net Finance Costs and JV losses (19.8) (16.0)
Profit Before Tax 187.5 33.1
(Less) / add: Adjusting Items (3.3) 87.5
Adjusted profit before tax from continuing operations 184.2 120.6
Six months to 30 Jun 2022 Six months to 30 Jun 2022 Six months to 30 Jun 2021 Six months to 30 Jun 2021
£m £m (restated)1 (restated)1
£m £m
Net cash generated from total operating activities 287.1 224.5
Add back: Payments in respect of adjusting items 4.7 7.4
Net cash generated from operating activities, before adjusting items 291.8 231.9
Purchase of property, plant and equipment (24.3) (18.1)
Purchase of intangible assets (1.2) (5.1)
Proceeds from disposal of property, plant and equipment 7.5 5.5
Net capital expenditure (18.0) (17.7)
Net payment in relation to leases (29.8) (28.2)
Dividends paid to non-controlling interests (2.9) (1.8)
Free cash flow 241.1 184.2
Less: Free cash flow from discontinued operations (17.4) (9.8)
Free cash flow from continuing operations 223.7 174.4
As at As at
30 Jun 2022 30 Jun 2021
£m £m
Adjusted operating profit from continuing operations 204.0 136.6
Adjusted operating profit for the previous 6 month period from continuing 144.8 115.5
operations
Adjusted operating profit from continuing operations on a 12 month basis 348.8 252.1
Net assets 1,137.4 1,159.4
Less: Net assets from discontinued operations - (83.7)
Net assets from continuing operations 1,137.4 1,075.7
Less: net funds (97.6) (101.9)
Add: net funds from discontinued operations - 8.6
Capital employed - continuing operations 1,039.8 982.4
Effect of averaging (28.7) 164.1
Average capital employed 1,011.1 1,146.5
Return on capital employed 34.5% 22.0%
As at 30 Jun 2022 As at 31 Dec 2021
£m £m
Net funds from continuing operations 97.6 59.0
Add back: lease liabilities 341.2 311.7
Adjusted net cash from continuing operations 438.8 370.7
1. See note 15.
Risks
Principal business risks
The Board has reassessed the principal business risks which could impact the
performance of the Group. These include:
Strategic risks, including:
§ Loss of OEM distribution contract;
§ Margin pressure arising from changing routes to market and lower margin
availability for all participants in the electric vehicle value chain;
§ New entrants - business models and technologies;
§ Delivery of change programmes;
§ The attraction and development of future skill sets;
§ Electric vehicle transition - optimising the supply of electric vehicles
and charging infrastructure to meet changing demand;
§ Political risks / social unrest; and
§ Achieving optimal returns from acquisitions.
Material operational risks, including:
§ Disruption to the supply of vehicles and parts;
§ A major cyber incident / data breach;
§ Loss of technology systems;
§ Health, safety and environmental incidents;
§ Legal / regulatory compliance;
§ Foreign exchange volatility; and
§ Risks of fraud or financial mis-statement.
The materialisation of these risks could have an adverse effect on the Group's
results or financial condition. If more than one of these risks occur, the
combined overall effect of such events may be compounded. The Group faces many
other risks which, although important and subject to regular review, have been
assessed as less significant and are not listed here. These include, for
example, natural catastrophe and business interruption risks and certain
financial risks.
The Group has defined and implemented systems of risk management and internal
control designed to address these risks. These systems can offer reasonable,
but not absolute assurance, regarding the management of these risks to an
acceptable level. In particular, the effectiveness of these systems may change
over time, for example with acquisitions or disposals or as the business
implements major change programmes. The effectiveness of these systems are
reviewed annually by the Audit Committee and improvements are made as
required.
Appendix - business models
Distribution
Americas & Africa
Country Brands
Argentina Subaru, Suzuki
Barbados (+) Chrysler, Freightliner, FUSO, Isuzu, JCB, Jeep, John Deere, Mercedes-Benz,
Subaru, Suzuki, Western Star
Chile BMW, BMW Motorrad, DFSK, Geely, Hino, Jaguar, Land Rover, MINI, Porsche, Rolls
Royce, Subaru, Volvo
Colombia DFSK, Dieci, Doosan, Hino, Jaguar, Land Rover, Mack, Mercedes-Benz, Subaru
Costa Rica Changan, JAC, Suzuki
Ecuador Freightliner, Mercedes-Benz, Western Star
El Salvador Freightliner, Mercedes-Benz, Western Star
Guatemala Freightliner, Mercedes-Benz, Western Star
Panama Suzuki
Peru BMW, BMW Motorrad, BYD, DFSK, MINI, Subaru
Uruguay Freightliner, Fuso, Mercedes-Benz
Djibouti BMW, Komatsu, Toyota
Ethiopia BMW, Hino, Komatsu, New Holland, Suzuki, Toyota
Kenya BMW, BMW Motorrad, Jaguar, Land Rover
APAC
Country Brands
Brunei Lexus, Toyota
Guam (+) BMW, Chevrolet, Freightliner, Hyundai, Kohler, Lexus, New Holland, Toyota
Hong Kong Daihatsu, Hino, Jaguar, Land Rover, Lexus, Maxus, Toyota
Indonesia Jaguar, Land Rover
Macau Daihatsu, Hino, Jaguar, Land Rover, Lexus, Toyota
Saipan Toyota
Singapore Hino, Lexus, Suzuki, Toyota
Thailand Jaguar, Land Rover
Australia Citroen, Peugeot, Subaru
New Zealand Subaru
Europe
Country Brands
Belgium Lexus, Toyota
Bulgaria Lexus, Toyota
Estonia BMW, BMW Motorrad, Ford, Jaguar, Land Rover, Mazda, MINI
Finland Jaguar, Land Rover, Mazda
Greece Lexus, Toyota
Latvia BMW, BMW Motorrad, Ford, Jaguar, Land Rover, Mazda, MINI
Lithuania BMW, BMW Motorrad, Ford, Hyundai, Jaguar, Land Rover, Mazda, MINI, Rolls-Royce
Luxembourg Lexus, Toyota
North Macedonia Lexus, Toyota
Poland Jaguar, Land Rover
Romania Lexus, Toyota
Retail
Country Brands
Australia(1) Isuzu Ute, Jeep, Kia, Mitsubishi, VW
Poland BMW, BMW Motorrad, MINI
UK Audi, BMW, Jaguar, Land Rover, Lexus, Mercedes-Benz, MINI, Porsche, Smart,
Toyota, Volkswagen
1: Following scale disposal of retail businesses in Australia, Retail is no
longer reported as a separate segment in APAC
(+): indicates the base of the core distribution operations which also serves
other neighbouring islands
Consolidated INCOME statement Six months to Six months to
30 Jun 2021
for the six months ended 30 June 2022 30 Jun 2022
Continuing operations Notes Total Total (restated)1
£m £m
Revenue 2 3,890.4 3,587.9
Cost of sales (3,275.1) (3,080.6)
Gross profit 615.3 507.3
Net operating expenses (408.0) (458.2)
Operating profit 2 207.3 49.1
Share of losses after tax of joint ventures and associates (0.3) -
Profit before interest and tax 207.0 49.1
Finance income 4 7.9 6.6
Finance costs 5 (27.4) (22.6)
Profit before tax 187.5 33.1
Tax 6 (46.8) (30.8)
Profit for the period from continuing operations 140.7 2.3
(Loss) / profit from discontinued operations 10b (240.2) 16.2
Total (loss) / profit for the period (99.5) 18.5
- Owners of the parent (103.0) 15.5
- Non-controlling interests 3.5 3.0
(99.5) 18.5
Earnings / (loss) per share from continuing operations attributable to the
owners of the parent
Basic earnings / (loss) per share (pence) 7 36.2p (0.2)p
Diluted earnings / (loss) per share (pence) 7 35.7p (0.2)p
(Loss) / earnings per share attributable to the owners of the parent
Basic (loss) / earnings per share (pence) 7 (27.2)p 3.9p
Diluted (loss) / earnings per share (pence) 7 (27.2)p 3.9p
1. See note 15.
Alternative performance measures
Operating profit from continuing operations 207.3 49.1
Adjusted for:
Other asset write-offs and impairments (0.5) -
Disposal of businesses - 68.5
Restructuring costs - 12.1
Acquisition of businesses 6.8 0.2
Accelerated amortisation 10.1 6.7
Other operating adjusting items (19.7) -
Adjusted operating profit from continuing operations 204.0 136.6
Share of losses after tax of joint ventures and associates (0.3) -
Finance income 7.9 6.6
Finance costs (27.4) (22.6)
Adjusted profit before tax from continuing operations 184.2 120.6
Tax on adjusted profit (48.0) (32.0)
Adjusted profit after tax from continuing operations 136.2 88.6
Adjusted earnings per share
Basic adjusted earnings per share 35.0p 21.9p
Diluted adjusted earnings per share 34.5p 21.8p
See note 17 for further details of alternative performance measures.
The notes are an integral part of these condensed consolidated interim
financial statements.
Consolidated statement of comprehensive income Six months to Six months to
for the six months ended 30 June 2022 30 Jun 2022 30 Jun 2021 (restated)1
£m £m
(Loss) / profit for the period (99.5) 18.5
Other comprehensive income:
Items that will not be reclassified to the consolidated income statement
Defined benefit pension scheme remeasurements 48.3 49.1
Deferred tax recognised in consolidated statement of comprehensive income - (0.4)
48.3 48.7
Items that may be reclassified subsequently to the consolidated income
statement
Cash flow hedges (45.2) 16.2
Exchange differences on translation of foreign operations 105.0 (62.3)
Exchange differences on translation of discontinued operations 18.7 0.4
Recycling of foreign currency reserve 99.0 108.1
Deferred tax recognised in consolidated statement of comprehensive income 16.4 (3.2)
193.9 59.2
Other comprehensive income for the period, net of tax 242.2 107.9
Total comprehensive income for the period 142.7 126.4
Total comprehensive income attributable to:
- Owners of the parent 142.0 123.7
- Non-controlling interests 0.7 2.7
142.7 126.4
Total comprehensive income attributable to owners of Inchcape plc arises from
- Continuing operations 264.5 107.1
- Discontinued operations (122.5) 16.6
142.0 123.7
1. See note 15.
The notes are an integral part of these condensed consolidated interim
financial statements.
Consolidated statement of financial position Notes As at As at
as at 30 June 2022 30 Jun 2022 31 Dec 2021
£m £m
Non-current assets
Intangible assets 469.0 394.1
Property, plant and equipment 532.0 548.0
Right-of-use assets 272.9 261.4
Investments in joint ventures and associates 8.0 4.9
Financial assets at fair value through other comprehensive income 11e 5.1 4.8
Derivative financial instruments 11e 4.1 3.0
Trade and other receivables 50.9 45.4
Deferred tax assets 91.6 67.4
Retirement benefit asset 171.8 135.3
1,605.4 1,464.3
Current assets
Inventories 1,275.3 1,134.7
Trade and other receivables 452.9 324.1
Financial assets at fair value through other comprehensive income 11e 0.2 0.2
Derivative financial instruments 11e 40.1 24.6
Current tax assets 8.9 9.0
Cash and cash equivalents 9b 654.6 596.4
2.432.0 2,089.0
Assets held for sale and disposal group 12 5.4 4.8
2,437.4 2,093.8
Total assets 4,042.8 3,558.1
Current liabilities
Trade and other payables (1,952.9) (1,548.3)
Derivative financial instruments 11e (70.6) (31.9)
Current tax liabilities (63.0) (63.0)
Provisions (41.6) (34.9)
Lease liabilities 9b (59.6) (56.5)
Borrowings 9b (5.8) (7.6)
(2,193.5) (1,742.2)
Non-current liabilities
Trade and other payables (77.8) (63.2)
Provisions (29.3) (23.4)
Derivative financial instruments 11e (19.2) -
Deferred tax liabilities (75.4) (68.1)
Lease liabilities 9b (281.6) (267.6)
Borrowings 9b (210.0) (210.0)
Retirement benefit liability (18.6) (53.1)
(711.9) (685.4)
Total liabilities (2,905.4) (2,427.6)
Net assets 1,137.4 1,130.5
Equity
Share capital 8 37.7 38.5
Share premium 146.7 146.7
Capital redemption reserve 8 142.9 142.1
Other reserves (27.5) (227.1)
Retained earnings 813.3 1,008.7
Equity attributable to owners of the parent 1,113.1 1,108.9
Non-controlling interests 24.3 21.6
Total equity 1,137.4 1,130.5
The notes are an integral part of these condensed consolidated interim
financial statements.
Consolidated statement of changes in equity
for the six months ended 30 june 2022
Notes Share capital Share premium Capital Other Retained Equity attributable to equity owners of the parent £m Non- controlling interests Total
£m £m redemption reserves earnings £m shareholders'
reserve £m £m equity
£m £m
At 1 January 2021 39.4 146.7 141.2 (248.2) 962.8 1,041.9 19.3 1,061.2
Profit for the period (restated)1 - - - - 15.5 15.5 3.0 18.5
Other comprehensive income for the period (restated)1 - - - 59.5 48.7 108.2 (0.3) 107.9
Total comprehensive income for the period (restated)1 - - - 59.5 64.2 123.7 2.7 126.4
Hedging gains and losses transferred to inventory - - - 0.4 - 0.4 - 0.4
Share-based payments, net of tax - - - - 5.3 5.3 - 5.3
Transactions with non-controlling interests - - - - - - 1.2 1.2
Net purchase of own shares by the Inchcape Employee Trust - - - - (6.2) (6.2) - (6.2)
Dividends:
- Owners of the parent 8b - - - - (27.1) (27.1) - (27.1)
- Non-controlling interests - - - - - - (1.8) (1.8)
At 30 June 2021 39.4 146.7 141.2 (188.3) 999.0 1,138.0 21.4 1,159.4
Profit for the period - - - - 101.5 101.5 1.9 103.4
Other comprehensive loss for the period - - - (37.5) 9.1 (28.4) (0.5) (28.9)
Total comprehensive loss for the period - - - (37.5) 110.6 73.1 1.4 74.5
Hedging gains and losses transferred to inventory - - - (1.3) - (1.3) - (1.3)
Share-based payments, net of tax - - - - 4.7 4.7 - 4.7
Share buyback programme (0.9) - 0.9 - (80.5) (80.5) - (80.5)
Dividends:
- Owners of the parent 8b - - - - (25.1) (25.1) - (25.1)
- Non-controlling interests - - - - - - (1.2) (1.2)
At 31 December 2021 38.5 146.7 142.1 (227.1) 1,008.7 1,108.9 21.6 1,130.5
Consolidated statement of changes in equity continued
Notes Share capital Share premium Capital Other Retained Equity attributable to equity owners of the parent £m Non- controlling interests Total
£m £m redemption reserves earnings £m shareholders'
reserve £m £m equity
£m £m
At 1 January 2022 38.5 146.7 142.1 (227.1) 1,008.7 1,108.9 21.6 1,130.5
(Loss) / profit for the period - - - - (103.0) (103.0) 3.5 (99.5)
Other comprehensive income for the period - - - 196.7 48.3 245.0 (2.8) 242.2
Total comprehensive income for the period - - - 196.7 (54.7) 142.0 0.7 142.7
Hedging gains and losses transferred to inventory - - - 2.9 - 2.9 - 2.9
Written put option 1 - - - - (10.2) (10.2) - (10.2)
Non-controlling interests on acquisition of subsidiaries - - - - - - 4.9 4.9
Share-based payments, - - - - 3.5 3.5 - 3.5
net of tax
Share buyback programme 8b (0.8) - 0.8 - (69.5) (69.5) - (69. 5)
Net purchase of own shares by the Inchcape Employee Trust - - - - (3.8) (3.8) - (3.8)
Dividends:
- Owners of the parent 8b - - - - (60.7) (60.7) - (60.7)
- Non-controlling interests - - - - - - (2.9) (2.9)
At 30 June 2022 37.7 146.7 142.9 (27.5) 813.3 1,113.1 24.3 1,137.4
1. See note 15.
The notes are an integral part of these condensed consolidated interim
financial statements.
Share-based payments include a deferred tax charge of £1.8m (30 June 2021 -
deferred tax credit of £0.6m; 31 December 2021 - deferred tax credit of
£1.6m).
Consolidated statement of cash flows
for the six months ended 30 June 2022
Notes Six months to Six months to
30 Jun 2022 30 Jun 2021 (restated)1
£m £m
Cash generated from operating activities
Cash generated from operations 9a 355.0 277.6
Tax paid (51.7) (38.6)
Interest received 6.1 7.0
Interest paid (22.3) (21.5)
Net cash generated from operating activities 287.1 224.5
Cash flows from investing activities
Acquisition of businesses, net of cash and overdrafts acquired 10a (77.7) (6.9)
Net cash (outflow) / inflow from sale of businesses 10b (32.3) 77.5
Purchase of investments in joint ventures and associates (2.8) -
Purchase of property, plant and equipment (24.3) (18.1)
Purchase of intangible assets (1.2) (5.1)
Proceeds from disposal of property, plant and equipment 7.5 5.5
Proceeds from disposal of intangible assets 0.1 -
Receipt from sub-lease receivables 0.9 1.0
Net cash (used in) / generated from investing activities (129.8) 53.9
Cash flows from financing activities
Share buyback programme 8 (58.5) -
Net purchase of own shares by the Inchcape Employee Trust (3.8) (6.2)
Net cash outflow from other borrowings 9b (2.0) -
Payment of capital element of lease liabilities 9b (30.7) (29.2)
Equity dividends paid 8b (60.7) (27.1)
Transactions with non-controlling interests - 1.2
Dividends paid to non-controlling interests (2.9) (1.8)
Net cash used in financing activities (158.6) (63.1)
9b (1.3) 215.3
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period 588.8 476.3
Effect of foreign exchange rate changes 63.3 (46.8)
Cash and cash equivalents at end of the period 650.8 644.8
Cash and cash equivalents consist of:
- Cash at bank and cash equivalents 555.3 388.3
- Short-term deposits 99.3 264.3
- Bank overdrafts (3.8) (7.8)
650.8 644.8
1. See note 15.
The notes are an integral part of these condensed consolidated interim
financial statements.
notes (unaudited)
1 BASIS OF PREPARATION AND ACCOUNTING POLICIES
Basis of preparation
The condensed consolidated interim financial statements for the period ended
30 June 2022 have been prepared on a going concern basis in accordance with UK
adopted International Accounting Standard 34 'Interim Financial Reporting' and
the Disclosure and Transparency Rules of the Financial Conduct Authority.
These condensed consolidated interim financial statements should be read in
conjunction with the Annual Report and Accounts 2021, which have been prepared
in accordance with UK adopted International Financial Reporting Standards and
International Financial Reporting Interpretation Committee (IFRIC)
interpretations and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS.
These condensed consolidated interim financial statements are unaudited but
have been reviewed by the external auditors. The condensed consolidated
interim financial statements in the Interim Report do not constitute statutory
accounts within the meaning of Section 434 of the Companies Act 2006. The
Group's published consolidated financial statements for the year ended 31
December 2021 were approved by the Board of Directors on 25 February 2022 and
delivered to the Registrar of Companies.
The report of the auditors on those accounts was unqualified and did not
contain an emphasis of matter paragraph or a statement under section 498 of
the Companies Act 2006. The condensed consolidated interim financial
statements were approved by the Board of Directors on 27 July 2022.
Going concern
Based on the Group's cash flow forecasts and projections, the Board is
satisfied that the Group will be able to operate within the level of its
committed facilities for the foreseeable future. For this reason, the Board
continues to adopt the going concern basis in preparing its financial
statements. In making this assessment the Group has considered available
liquidity in relation to net debt and committed facilities, the Group's latest
forecasts for 2022 and 2023 cash flows together with appropriate
sensitivities.
Given the global political and economic uncertainty resulting from the
conflict in the Ukraine and inflationary pressures, we expect to see continued
volatility, some business disruption and the impact of economic downturns in
the markets in which the Group operates during the remainder of 2022 and into
2023.
Committed bank facilities and Private Placement borrowings totalling £910m,
of which £210m was drawn at 30 June 2022, are subject to the same interest
cover covenant based on an adjusted EBITA measure to interest on consolidated
borrowings measured on a trailing 12-month basis at June and December.
The latest Group forecasts for 2022 and 2023 indicate that the Group is
expected to be compliant with this covenant throughout the forecast period and
to have sufficient liquidity to continue in operation throughout that period.
A range of sensitivities has been applied to the forecasts to assess the
Group's compliance with its covenant requirements over the forecast period.
These sensitivities included:
· a reduction in New and Used vehicle sales due to a short-term shortage of
semi-conductor chips, reducing gross profit in 2023 with no mitigating
actions;
· a general economic downturn in the markets in which the Group operates
combined with an increase in costs due to ongoing inflationary pressures,
impacting gross profit and operating expenses in 2023 with no mitigating
actions;
· an appreciation in Sterling against the Group's main trading companies;
combined with
· working capital sensitivities.
In scenarios where some, but not all, of the above sensitivities occur at the
same time, the Group has modelled the possibility of the interest cover
covenant being breached in 2022 and 2023. With the interest cover covenant
measured on a trailing 12-month basis, the sensitised forecasts indicate that
the Group is not expected to breach any covenants and would be compliant with
the interest cover requirements at December 2022 and throughout the forecast
period. Additionally, under these circumstances, the Group expects to have
sufficient funds to meet cash flow requirements.
A reverse stress test scenario analysis, concluded that a set of circumstances
in which the Group would breach its covenant or have insufficient funds to
meet cash flow requirements are considered to be remote, relative to the
sensitivities referred to above.
The Board therefore concluded that the Group will be able to operate within
the level of its committed facilities for the foreseeable future and the
Directors consider it appropriate to adopt the going concern basis of
accounting in preparing the condensed consolidated interim financial
statements.
Newly adopted accounting policies
The accounting policies adopted in the preparation of the condensed
consolidated interim financial statements are consistent with those of the
Group's Annual Report and Accounts 2021 with the exception of standards,
amendments and interpretations, which have been newly adopted from 1 January
2022:
· Amendments to IFRS 3 Business Combinations, reference to conceptual
framework;
· Amendments to IAS 16 Property Plant & Equipment, proceeds before
intended use;
· Amendments to IAS 37 Onerous Contracts, cost of fulfilling a contract;
and
· Annual Improvements to IFRS Standards 2018-2020.
The adoption of the standards and interpretations listed above has not led to
any changes to the Group's accounting policies or had any other material
impact on the financial position or performance of the Group.
The Group has not early adopted other standards, amendments to standards or
interpretations that have been issued but are not yet effective.
Standards not yet effective
The following standards were in issue but were not yet effective at the
balance sheet date. These standards have not yet been early adopted by the
Group, and will be applied for the Group's financial years commencing on or
after 1 January 2023:
· IFRS 17 Insurance Contracts;
· Amendments to IFRS 17 Insurance Contracts: Initial Application of IFRS 17
and IFRS 9 Comparative Information;
· Amendments to IAS 12 relating to Deferred tax related to assets and
liabilities arising from a single transaction;
· Amendments to IFRS 4 when applying IFRS 9 Financial Instruments;
· Amendments to IAS 1 Presentation of Financial Instruments, classification
of liabilities as current or non-current; and
· Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates
and Errors: Definition of Accounting Estimates.
Management are currently reviewing the new standards to assess the impact that
they may have on the Group's reported position and performance. Management do
not expect that the adoption of the standards listed above will have a
material impact on the financial statements of the Group.
Critical accounting judgements and sources of estimation uncertainty
The preparation of these condensed consolidated interim financial statements
in accordance with generally accepted accounting principles requires the use
of estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Although these estimates
are based on management's best knowledge, actual results may ultimately differ
from those estimates. The estimates and underlying assumptions are reviewed on
an ongoing basis.
The Directors have made a number of estimates and assumptions regarding the
future and made some significant judgements in applying the Group's accounting
policies. The critical accounting judgements and key sources of estimation
uncertainty remain consistent with those presented in the accounting policies
note within the Group's 2021 Annual Report and Accounts. Those that are new or
significant to the preparation of the interim financial statements are
presented below.
Impairment of goodwill and other indefinite life intangible assets
The carrying amount of goodwill and other indefinite life intangible assets
has been allocated to CGU groups within the following reporting segments:
As at 30 Jun 2022 As at 31 Dec 2021
Goodwill Distribution Total Goodwill Distribution Total
£m agreements £m £m agreements £m
£m £m
At 1 January 116.3 239.0 355.3 119.0 246.6 365.6
Businesses acquired 8.0 56.9 64.9 17.7 3.8 21.5
Impairment (charge)/reversal for the period - - - (12.9) 12.9 -
Effect of foreign exchange rates 8.6 13.1 21.7 (7.5) (24.3) (31.8)
132.9 309.0 441.9 116.3 239.0 355.3
As at 30 Jun 2022 As at 31 Dec 2021
Reporting segment CGU group Goodwill Distribution Total Goodwill Distribution Total
£m agreements £m £m agreements £m
£m £m
UK and Europe Distribution Baltics - BMW 5.9 27.8 33.7 5.8 27.2 33.0
Americas and Americas - Daimler 6.5 32.4 38.9 5.8 29.7 35.5
Africa Distribution
Americas - Hino/Subaru/Ditec 43.8 145.8 189.6 39.8 116.3 156.1
Americas - Suzuki 27.5 73.1 100.6 24.8 65.8 90.6
Americas - Simpsons - 29.9 29.9 - - -
Kenya 1.3 - 1.3 1.1 - 1.1
APAC Distribution Singapore 24.0 - 24.0 22.3 - 22.3
Guam 22.2 - 22.2 16.7 - 16.7
UK and Europe Retail United Kingdom 1.7 - 1.7 - - -
132.9 309.0 441.9 116.3 239.0 355.3
Goodwill acquired in a business combination is allocated to the cash
generating units (CGUs) or group of CGUs (hereafter collectively referred to
as 'CGU groups') that are expected to benefit from the synergies associated
with that business combination. Indefinite-life intangible assets, principally
distribution agreements acquired in a business combination, are also allocated
to the CGUs or CGU groups that are expected to benefit from the cash flows
associated with the relevant agreements.
Indicators of impairment in goodwill and other indefinite-life intangible assets
In accordance with the Group's accounting policy, goodwill and other
indefinite-life intangible assets are tested at least annually for impairment
and whenever events or circumstances indicate that the carrying amount may not
be recoverable.
In the first half of 2022, the Group carried out an assessment as to whether
any impairment testing is required to be performed for the six months ending
30 June 2022. As set out in IAS 36 Impairment of Assets, the assessment
involved the Group reviewing potential indicators of impairment to determine
if any of the Group's assets should be tested.
The review included examining data trends on asset valuations, reviewing
latest macro-economic data including forecast recovery of global economies,
reviewing latest industry data including industry volumes and comparing the
Group's results against cash flows used in previously prepared impairment
models and latest forecasts. The conclusion reached from the review performed
was that there was no requirement to test any assets or cash generating units
for impairment for the six month period to 30 June 2022.
At 31 December 2021, the Group's value in use calculations prepared for the
cash generating units represented by Central America business in the Americas
were sensitive to a change in the key assumptions used. The recoverable amount
calculated for the Central America CGU was £117.6m. Cash flows were
discounted back to present value and resulted in the impairment of the
goodwill balance of £12.9m and a partial reversal of the impairment of the
distribution agreement recognised in 2020 of £12.9m. The cash flows used
within the impairment model were based on assumptions which are sources of
estimation uncertainty and small movements in these assumptions could
therefore lead to a further impairment. The table below shows the sensitivity
analysis performed on the key assumptions in the impairment model using
reasonably possible changes in these key assumptions and what additional
impairment charge / reversal would arise.
Increase / (decrease) in assumption Impairment charge Impairment reversal
£m £m
Revenue CAGR (%) (1.0%)/1.0% (17.5) 20.3
Pre-tax discount rate (%) 1.0%/(1.0%) (14.3) 18.6
Average gross margin (%) (0.5%)/0.5% (9.1) 9.1
Long-term growth rate (%) (0.5%)/0.5% (5.3) 7.1
1 BASIS OF PREPARATION AND ACCOUNTING POLICIES CONTINUED
Impairment of computer software, property, plant and equipment and right-of-use assets
Computer software, property, plant and equipment and right-of-use assets are
reviewed for impairment if events or circumstances indicate that the carrying
value may not be recoverable. When an impairment review is carried out, the
recoverable value is determined based on the higher of value in use
calculations, which require estimates to be made of future cash flows, or fair
value less costs of disposal.
The assessment outlined above as to whether any impairment testing required
performing for the six months ending 30 June 2022 also incorporated computer
software, property, plant and equipment and right-of-use assets. The
conclusion reached was that there was no requirement to test any of these
assets for impairment for the six month period to 30 June 2022.
Disposal of businesses
During the period the Group agreed the sale of its remaining operations in
Russia to management. Following the disposal in 2021 of the operations in St
Petersburg in 2021, the sale represented a strategic withdrawal from the
country. Although there is a call option in place which would enable the Group
to benefit from any increase in value of the business over the next seven
years, particularly in the event of its onward sale, the Group has no
intention of re-entering the market. The Directors determined that the call
option did not represent a substantive right to control the Russian business
and that the disposal constituted a transfer of control. The Directors also
concluded that the disposal of the Russian business represented withdrawal
from a significant separate geographical area of operation and that disclosure
as a discontinued operation was appropriate (see note 10).
The price agreed for the sale of the Russian business was €76m (c£63m), to
be satisfied over a period of five years in annual instalments. Significant
uncertainty exists with regards to the amount that will ultimately be
recoverable given the precarious outlook for the Russian economy and the
uncertainty regarding the continued supply of vehicles and parts by the OEMs.
In estimating the amount to be recognised as at 30 June 2022, management have
developed a number of scenarios for the possible performance of the
business. Probabilities were applied to these scenarios which indicated that
some of the receivable would be received over time. However, given the
difficulties in remitting the proceeds and uncertainty over whether this will
change in the future, management has concluded that £nil value should be
assigned to the receivable at 30 June 2022.
Written put option - Ditec acquisition
The non-controlling interest has a written put option over its 30% equity
ownership in the Ditec business. This permits the holder to sell their shares
to the Group at a price determined by an EBITDA driven formula during a three
year period post-acquisition.
The amount that may become payable under the option on exercise is initially
recognised at the present value of the redemption amount within trade and
other payables with a corresponding charge directly to equity. The charge to
equity is recognised separately as written put options over non-controlling
interests. The liability is subsequently remeasured through equity for any
subsequent charges in value. In the event that the option expires unexercised,
the liability is derecognised with a corresponding adjustment to equity.
Adjusting items
The Group has historically reported certain items as 'exceptional', items
which in the judgement of the Group need to be disclosed separately by virtue
of their nature, size or incidence. Effective 1 January 2022, the Group's
terminology applied to such items has changed from 'exceptional' to
'adjusting', as the term 'adjusting' provides a broader measure of alternative
performance over time, which ought to provide investors with a more meaningful
measure of the underlying performance of the Group.
In the period, the Group has reported an aggregate pre-tax adjusting items
gain of £3.3m (see note 3). The separate reporting of adjusting items helps
provide additional useful information regarding the Group's underlying
business performance and is used by management to facilitate internal
performance analysis. Items that may be considered as adjusting items include
gains or losses on the disposal of businesses, restructuring of businesses,
acquisition costs, asset impairments and the tax effects of these items. Any
reversal of an amount previously recognised as an adjusting item would also be
recognised as an adjusting item in a subsequent period.
Alternative performance measures (APMs)
In the prior year, the consolidated income statement included presentation of
certain alternative performance measures in addition to IFRS measures. In the
current period, the consolidated income statement presents only IFRS measures
which is in line with the basis of preparation disclosed in this note. The
alternative performance measures used by the Group are included in note 17.
This includes further information on the definitions, purpose and
reconciliation to IFRS measures.
2 SEGMENTAL ANALYSIS
The Group has four reportable segments which have been identified based on the
operating segments of the Group that are regularly reviewed by the chief
operating decision-maker, which has been determined to be the Executive
Committee, in order to assess performance and allocate resources. Operating
segments are then aggregated into reporting segments to combine those with
similar economic characteristics.
The following summary describes the operations of each of the Group's
reportable segments:
Distribution APAC, UK and Europe, Americas Exclusive distribution, sales and marketing activities of New vehicles and
and Africa Parts. Sale of New and Used vehicles together with logistics services where
the Group may also be the exclusive distributor, alongside associated
Aftersales activities of service, bodyshop repairs and parts sales.
Retail UK and Europe Sale of New and Used vehicles, together with associated Aftersales activities
of service, bodyshop repairs and parts sales.
Distribution Retail
Six months to 30 June 2022 APAC UK and Americas and Africa Total UK and Total Total
£m Europe £m Distribution Europe Retail £m
£m £m £m £m
Revenue from third parties 1,074.1 955.1 710.0 2,739.2 1,151.2 1,151.2 3,890.4
Results
Adjusted operating profit 71.6 39.9 62.2 173.7 30.3 30.3 204.0
Operating adjusting items 3.3
Operating profit from continuing operations 207.3
Share of losses after tax of joint ventures and associates (0.3)
Profit before interest and tax 207.0
Finance income 7.9
Finance costs (27.4)
Profit before tax from continuing operations 187.5
Tax (46.8)
Profit for the period from continuing operations 140.7
Revenue is further analysed as follows:
Six months to 30 June 2022 £m
UK 1,042.0
Australia 512.9
Rest of the world 2,335.5
Group 3,890.4
Distribution Retail
Six months to 30 June 2021 (restated)1 APAC UK and Americas and Total UK and Total Total
£m Europe Africa Distribution Europe Retail £m
£m £m £m £m £m
Revenue from third parties 1,128.5 737.8 488.6 2,354.9 1,233.0 1,233.0 3,587.9
Results
Adjusted operating profit 70.5 19.8 29.4 119.7 16.9 16.9 136.6
Operating adjusting items (87.5)
Operating profit from continuing operations 49.1
Share of profits after tax of joint ventures and associates -
Finance income 6.6
Finance costs (22.6)
Profit before tax from continuing operations 33.1
Tax (30.8)
Profit for the period from continuing operations 2.3
Revenue is further analysed as follows:
Six months to 30 June 2021 £m
UK 1,005.5
Australia 537.4
Rest of the world 2,045.0
Group 3,587.9
1. See note 15.
3 ADJUSTING ITEMS
Six months to Six months to
30 Jun 2022 30 Jun 2021
£m (restated)1
£m
Other asset write-offs and impairments (note 1) 0.5 -
Disposal of businesses (note 10) - (68.5)
Restructuring costs - (12.1)
Acquisition of businesses (6.8) (0.2)
Accelerated amortisation (10.1) (6.7)
Other operating adjusting items 19.7 -
Total adjusting items before tax 3.3 (87.5)
Tax on adjusting items 1.2 1.2
Total adjusting items 4.5 (86.3)
1. See note 15.
During the period operating costs of £6.8m have been incurred in connection
with the acquisition and integration of businesses, These costs have been
reported as adjusting items to better reflect the underlying performance of
the business.
With effect from 1 April 2022, the Trustee of the Inchcape Motors Pension
Scheme now uses the Consumer Prices Index (CPI) instead of Retail Prices Index
(RPI) for those elements of pensions from the Group, Motors and Normand
sections that are increased in line with RPI. We have concluded that the
change in indexation represents a plan amendment and the impact of the change
in benefits payable of £19.7m should be recognised in the income statement as
a past service cost. Considering the magnitude and nature of the item, the
impact on the income statement has been reported as an adjusting item.
In 2021, the Group started to migrate the Group's existing ERP applications to
a cloud-based solution. This was a strategic decision to consolidate and
upgrade the systems, improve speed and performance and facilitate centralised
support following the transformation of the Information Technology
organisational structure. The new solution was determined to be Software as a
Service and therefore the existing software assets no longer fall to be
treated as an asset under IAS 38 once the migration to the new solution has
occurred. Consequently, the useful life of the existing assets was reassessed
and the impact accounted for prospectively as a change in an estimate. This
change resulted in a significant increase in the amortisation recognised for
software costs. Accordingly, the incremental amortisation of £10.1m has been
disclosed as an adjusting item.
In the period to 30 June 2021, the Group:
· disposed of businesses in the UK, Belgium & Luxembourg and Russia.
The loss on disposal in Russia related to the sale of Toyota and Audi retail
operations in St. Petersburg. The reported loss included a loss of £108.0m
relating to the recycling of cumulative exchange differences previously
recognised in other comprehensive income, as required under IFRS.
· incurred adjusting operating costs of £0.2m in connection with the
acquisition and integration of businesses. These primarily related to the
Daimler business acquired in Guatemala; and
· Due to the impact of COVID-19 on the Group's operations a review of the
Group's cost base was initiated to identify savings and plan longer-term
changes to the way in which the Group operates. A proposal was approved by the
Board for a planned restructuring activity under which the Group incurred
restructuring costs of £28.4m during 2020. These costs were principally in
relation to redundancy, consultancy and occupancy costs. In 2021, a further
£12.1m (2020: £9.1m) of restructuring costs have been recognised, mainly in
relation to Group-wide transformation projects impacting both Finance and IT,
encompassing the potential for sharing back-office services and review of
organisational structures and costs.
4 FINANCE INCOME
Six months to Six months to
30 Jun 2022 30 Jun 2021
£m (restated)1
£m
Bank and other interest receivable 5.9 6.0
Net interest income on post-retirement plan assets and liabilities 1.5 0.2
Lease finance income 0.3 0.3
Other finance income 0.2 0.1
Total finance income 7.9 6.6
1. See note 15.
5 FINANCE COSTS
Six months to Six months to
30 Jun 2022 30 Jun 2021 (restated)1
£m £m
Interest payable on bank borrowings 5.0 3.8
Interest payable on Private Placement 3.2 3.2
Lease finance costs 4.6 5.2
Stock holding interest 8.3 7.8
Other finance costs 6.3 2.6
Total finance costs 27.4 22.6
1. See note 15.
6 TAX
Six months to Six months to
30 Jun 2022 30 Jun 2021
£m (restated)1
£m
Current tax - UK corporation tax - -
- Overseas tax 51.7 41.1
Adjustments to prior year liabilities - UK - -
- Overseas 2.0 (2.6)
Current tax 53.7 38.5
Deferred tax (6.9) (7.7)
Total tax charge 46.8 30.8
- Tax charge on adjusted profit 48.0 32.0
- Tax credit on adjusting items (1.2) (1.2)
Total tax charge 46.8 30.8
1. See note 15.
The tax charge for the 6 months ended 30 June 2022 has been calculated by
applying the estimated average annual effective income tax rate for each
jurisdiction in which Inchcape operates to the interim period pre-tax income
of each jurisdiction as required by IAS 34 'Interim Financial Reporting'. Tax
credited on adjusting items has been separately calculated and is disclosed
above.
The effective tax rate for the period to 30 June is 25.0% compared to 93.1%
(restated) for the same period last year. The effective tax rate on adjusted
profit for the period is 26.1% compared to 26.5% (restated) for the same
period last year.
Factors affecting current and future tax charges
The Group's tax expense, and effective tax rate, could be affected by several
factors including; the resolution of audits and disputes, changes in tax laws
or tax rates, the ability to utilise brought forward losses and business
acquisitions and disposals. In addition, a change in profit mix between low
and high taxed jurisdictions will impact the Group's tax expense.
The utilisation of brought forward tax losses or the recognition and
de-recognition of deferred tax assets associated with such losses may also
give rise to tax charges or credits. The recognition of deferred tax assets,
particularly in respect of tax losses, is based upon an assessment of whether
it is probable that there will be sufficient and suitable taxable profits in
the relevant legal entity or tax group against which to utilise the assets in
the future. Judgement is required when determining probable future taxable
profits. In the event that actual taxable profits are different to those
forecast, the Group's future tax expense and effective tax rate could be
affected.
The Group has published its approach to tax on www.inchcape.com covering its
tax strategy and governance framework.
7 EARNINGS PER SHARE
Six months to Six months to
30 Jun 2022 30 Jun 2021 (restated)1
£m £m
(Loss) / profit for the period (99.5) 18.5
Non-controlling interests (3.5) (3.0)
Basic (loss) / earnings (103.0) 15.5
Loss / (profit) for the period from discontinued operations 240.2 (16.2)
Basic earnings / (loss) from continuing operations attributable to owners of 137.2 (0.7)
the parent
Adjusting items (4.5) 86.3
Adjusted earnings from continuing operations 132.7 85.6
Basic earnings per share
Basic earnings / (loss) per share from continuing operations 36.2p [0.2)p
Basic (loss) / earnings per share from discontinued operations (63.4)p 4.1p
Total basic (loss) / earnings per share (27.2)p 3.9p
Diluted earnings per share
Diluted earnings / (loss) per share from continuing operations 35.7p (0.2)p
Diluted (loss) / earnings per share from discontinued operations2 (63.4)p 4.1p
Total diluted (loss) / earnings per share2 (27.2)p 3.9p
Adjusted earnings per share from continuing operations
Basic Adjusted earnings per share from continuing operations 35.0p 21.8p
Diluted Adjusted earnings per share from continuing operations 34.5p 21.6p
1. See note 15.
2. Due to the impact of dilutive ordinary shares having the effect of
decreasing both the loss attributable to discontinued operations and the loss
attributable to total operations, the basic earnings per share calculated has
been shown.
Six months to Six months to
30 Jun 2022 number 30 Jun 2021 number
Weighted average number of fully paid ordinary shares in issue during the 379,788,540 393,274,393
period
Weighted average number of fully paid ordinary shares in issue during the
period:
- Held by the Inchcape Employee Trust (783,582) (550,548)
Weighted average number of fully paid ordinary shares for the purposes of 379,004,958 392,723,845
basic EPS
Dilutive effect of potential ordinary shares 5,553,858 3,168,318
Adjusted weighted average number of fully paid ordinary shares in issue during 384,558,816 395,892,163
the period for the purposes of diluted EPS
Basic earnings / (loss) per share is calculated by dividing the Basic earnings
/ (loss) for the period by the weighted average number of fully paid ordinary
shares in issue during the period, less those shares held by the Inchcape
Employee Trust and repurchased as part of the share buyback programme.
Diluted earnings / (loss) per share is calculated on the same basis as the
Basic earnings / (loss) per share with a further adjustment to the weighted
average number of fully paid ordinary shares to reflect the effect of all
dilutive potential ordinary shares. Dilutive potential ordinary shares
comprise share options and other share-based awards.
Basic Adjusted earnings (which excludes adjusting items) is adopted to assist
the reader in understanding the underlying performance of the Group. Adjusted
earnings per share is calculated by dividing the Adjusted earnings for the
period by the weighted average number of fully paid ordinary shares in issue
during the period, less those shares held by the Inchcape Employee Trust and
repurchased as part of the share buyback programme.
Diluted Adjusted earnings per share is calculated on the same basis as the
Basic Adjusted earnings per share with a further adjustment to the weighted
average number of fully paid ordinary shares to reflect the effect of all
dilutive potential ordinary shares. Dilutive potential ordinary shares
comprise share options and other share-based awards.
Information presented for diluted and diluted adjusted earnings per ordinary
share uses the weighted average number of shares as adjusted for potentially
dilutive ordinary shares as the denominator, unless it has the effect of
increasing the profit or decreasing the loss attributable to each share.
8 SHAREHOLDERS' EQUITY
A. Issue of ordinary shares
During the period, the Group issued £nil (June 2021 - £nil, Dec 2021 -
£nil) of ordinary shares exercised under the Group's share option schemes.
Share buyback programme
During the six months ended 30 June 2022, the Company repurchased 7,913,076 of
its own shares (June 2021 - none, Dec 2021 - 9,422,455) through purchases on
the London Stock Exchange, at a cost of £57.8m (June 2021 - £nil, Dec 2021 -
£80.5m). The shares repurchased during the period were cancelled. An amount
of £0.8m (June 2021 - £nil, Dec 2021 - £0.9m), equivalent to the nominal
value of the cancelled shares, has been transferred to the capital redemption
reserve. Costs of £0.7m (June 2021 - £nil, Dec 2021 - £nil) associated with
the transfer to the Group of the repurchased shares and their subsequent
cancellation were charged to the profit and loss reserve.
The Group has a contract in place with a broker to purchase £50m of its own
shares for cash in connection with the £100m buyback announced on 28 February
2022. The noncancellable component of the contract gives rise to an additional
financial liability as at 30 June 2022 which has been measured based on the
average of actual share purchase costs made since the inception of the
contract. A liability of £11.0m has been recognised (June 2021 - £nil, Dec
2021 - £nil) which has been charged to retained earnings.
B. Dividends
The following dividends were paid by the Group:
Six months to Six months to Year to
30 Jun 2022 30 Jun 2021 31 Dec 2021
£m £m £m
Final dividend for the year ended 31 December 2021 of 16.1p per share 60.7 27.1 27.1
(2020 - 6.9p per share)
Interim dividend for the six months ended 30 June 2021 of 6.4p per share - - 25.1
(2020 - nil per share)
60.7 27.1 27.1
An interim dividend of 7.5p per share for the period ending 30 June 2022 was
approved by the Board on 27 July 2022 and will be paid on 2 September 2022 to
shareholders who are on the register at close of business on 5 August 2022.
The Dividend Reinvestment Plan (DRIP) is available to ordinary shareholders
and the final date for receipt of elections to participate in the DRIP is 11
August 2022.
9 NOTES TO THE STATEMENT OF CASH FLOWS
A. Reconciliation of cash generated from operations
Six months to Six months to
30 Jun 2022 30 Jun 2021 (restated)1
£m £m
Cash flows from operating activities
Operating profit - continuing operations 207.3 49.1
Operating profit - discontinued operations 20.5 20.2
Adjusting items2 (3.3) 88.3
Amortisation including non-adjusting impairment charges 6.4 9.7
Depreciation of property, plant and equipment including non-adjusting 14.3 15.1
impairment charges
Depreciation of right-of-use assets 26.9 24.0
Profit on disposal of property, plant and equipment and intangible assets (1.4) (1.3)
Gain on disposal of right-of-use assets (0.8) (0.1)
Share-based payments charge 5.3 4.7
(Increase) / decrease in inventories (102.8) 123.3
Increase in trade and other receivables (134.5) (46.8)
Increase / (decrease) in trade and other payables 316.8 (4.1)
Increase in provisions 7.0 4.9
Pension contributions more than pension charge for the period3 (2.1) (5.5)
(Increase) / decrease in interest in leased vehicles (0.4) 2.6
Payments in respect of operating adjusting items (4.7) (7.4)
Other non-cash items 0.5 0.9
Cash generated from operations 355.0 277.6
1. See note 15.
2. In the six month to 30 June 2021, adjusting items includes £0.8m
relating to Russian discontinued operations.
3. Includes additional payments of £2.1m (June 2021 - £4.7m).
B. Net debt reconciliation
Liabilities from financing activities Assets
Borrowings Leases Sub-total Cash / bank overdrafts Total
£m £m £m £m net debt
£m
Net funds / (debt) at 1 January 2021 (210.0) (332.8) (542.8) 476.3 (66.5)
Cash flows - 29.2 29.2 144.7 173.9
Acquisitions - (1.6) (1.6) (6.9) (8.5)
Disposals - 0.1 0.1 77.5 77.6
New lease liabilities - (34.2) (34.2) - (34.2)
Transferred from liabilities held for sale - (1.3) (1.3) - (1.3)
Foreign exchange adjustments - 7.7 7.7 (46.8) (39.1)
Net funds / (debt) at 30 June 2021 (210.0) (332.9) (542.9) 644.8 101.9
Cash flows 12.7 30.1 42.8 (23.2) 19.6
Acquisitions (12.7) (0.3) (13.0) (13.3) (26.3)
Disposals - 10.0 10.0 (1.3) 8.7
New lease liabilities - (34.1) (34.1) - (34.1)
Foreign exchange adjustments - 3.1 3.1 (18.2) (15.1)
Net funds / (debt) at 1 January 2022 (210.0) (324.1) (534.1) 588.8 54.7
Cash flows 2.0 30.7 32.7 108.7 141.4
Acquisitions (4.5) (32.9) (37.4) (77.7) (115.1)
Disposals - 13.1 13.1 (32.3) (19.2)
New lease liabilities - (13.3) (13.3) - (13.3)
Foreign exchange adjustments 0.5 (14.7) (14.2) 63.3 49.1
Net funds / (debt) at 30 June 2022 (212.0) (341.2) (553.2) 650.8 97.6
Net debt is analysed as follows:
As at As at As at
30 Jun 2022 31 Dec 2021 30 Jun 2021
£m £m £m
Cash and cash equivalents as per the balance sheet 654.6 596.4 652.6
Borrowings - disclosed as current liabilities (5.8) (7.6) (7.8)
Add back: amounts treated as debt financing (see below) 2.0 - -
Cash and cash equivalents as per the statement of cash flows 650.8 588.8 644.8
Debt financing
Borrowings - disclosed as current liabilities and treated as debt financing (2.0) - -
(see above)
Borrowings - disclosed as non-current liabilities (210.0) (210.0) (210.0)
Lease liabilities (341.2) (324.1) (332.9)
Debt financing (553.2) (534.1) (542.9)
Net funds 97.6 54.7 101.9
Add back: lease liabilities 341.2 324.1 332.9
Adjusted net cash 438.8 378.8 434.8
Borrowings disclosed as current liabilities include bank overdrafts held in
cash pooling arrangements which have not been offset in the consolidated
statement of financial position. These are included within cash and cash
equivalents in the consolidated statement of cash flows.
As at As at As at
30 Jun 2022 31 Dec 2021 30 Jun 2021
£m £m £m
Cash at bank and cash equivalents 555.3 501.8 388.3
Short-term deposits 99.3 94.6 264.3
654.6 596.4 652.6
£77.0m (31 December 2021 - £71.8m; 30 June 2021 - £66.4m) of cash and cash
equivalents is held in Ethiopia where prior approval is required to transfer
funds abroad, and currency may not be available locally to effect such
transfers.
10 ACQUISITIONS AND DISPOSALS
A. Acquisitions
On 28 March 2022, to expand its distribution footprint in the Americas, the
Group acquired 70% of Comercializadora Ditec Automoviles S.A., acquiring the
distribution rights to Porsche, Volvo and Jaguar Land Rover in Chile, for
total cash consideration of £14.3m. Distribution agreements with a
provisional fair value of £28.0m were recognised at the date of acquisition.
Provisional goodwill of £3.0m arose on the acquisition. None of the goodwill
is expected to be deductible for tax purposes.
On 29 April 2022, the Group acquired the entire share capital of ITC Group, a
distributor of Suzuki, Mercedes-Benz, Subaru and Chrysler brands in the
Caribbean, from the Simpson Group. The total cash consideration paid was
£61.5m. Distribution agreements with a provisional fair value of £28.9m were
recognised at the date of acquisition. Provisional goodwill of £nil arose on
the acquisition.
These businesses were acquired to further expand the Group's footprint with
both existing and new OEM partners and using our distribution business as a
platform to capture more of a vehicle's lifecycle value.
During the period, the Group also acquired businesses in Guam and the UK. The
total cost of these acquisitions was £14.7m and goodwill of £5.2m has been
recognised.
Ditec ITC Group Other Total
£m £m £m £m
Assets and liabilities acquired
Distribution agreements recognised on acquisition 28.0 28.9 - 56.9
Computer software - 2.4 - 2.4
Property, plant and equipment 3.6 2.2 7.7 13.5
Right-of-use assets 17.7 5.8 - 23.5
Inventory 23.9 22.2 1.8 47.9
Receivables 14.5 15.8 - 30.3
Cash and cash equivalents 6.0 6.4 - 12.4
Other assets 1.2 0.1 - 1.3
Payables (41.4) (14.5) - (55.9)
Borrowings (4.5) - - (4.5)
Lease liabilities (27.1) (5.8) - (32.9)
Provisions - (1.1) - (1.1)
Other liabilities (5.7) (0.9) - (6.5)
Net identifiable assets 16.2 61.5 9.5 87.2
Less: Non-controlling interests (4.9) - - (4.9)
Goodwill 3.0 - 5.2 8.2
Net assets acquired 14.3 61.5 14.7 90.5
Consideration comprises
Cash consideration 14.3 61.5 14.7 90.5
Total consideration 14.3 61.5 14.7 90.5
During the period, adjustments have been made to decrease the fair of assets
and liabilities acquired in business combinations in 2021 of £0.2m in
addition to the return of cash consideration of £0.4m. This resulted in a
reduction to goodwill of £0.2m (2021 - nil).
Cash outflow to acquire businesses, net of cash and overdrafts acquired Six months to Six months to
30 Jun 2022
30 Jun 2021
£m
£m
Cash consideration 90.1 6.9
Less: Cash acquired (12.4) -
Net cash outflow 77.7 6.9
Income statement items Six months to
30 Jun 2022
£m
Revenue recognised since the acquisition date in the consolidated income 60.0
statement
Profit after tax since the acquisition date in the consolidated income 2.3
statement
In 2021, the Group acquired the Mercedes-Benz passenger and commercial
vehicles distribution operations in Guatemala, and the distribution and retail
of Freightliner Trucks in Guatemala and El Salvador, from Grupo Q, for a total
cash consideration of £5.5m. A distribution agreement with a fair value of
£2.8m was recognised at the date of acquisition. The business was acquired to
strengthen and further expand the Group's partnership with
Daimler-Mercedes-Benz in Central and South America. Goodwill of £1.0m arose
on the acquisition. None of the goodwill is expected to be deductible for tax
purposes. During 2021, the Group also acquired inventory assets from Star
Motors SA de CV, a company register in El Salvador, as well as the Daimler
Trucks North America distribution rights in Ecuador. The total cost of these
acquisitions was £1.4m.
B. Disposals and discontinued operations
During the period the Group agreed the sale of its remaining retail operations
in Russia to management. The business represented the Group's remaining
operation in Russia following the disposal of its St Petersburg business
during 2021. The Russian operation is reported in the current period as a
discontinued operation. Financial information relating to the discontinued
operation for the period to the date of disposal is set out below.
Financial performance and cash flow information
The financial performance and cash flow information presented are for the five
months ended 31 May 2022 and for the six months to 30 June 2021.
Five months to Six months to
31 May 2022 30 Jun 2021
£m £m
Revenue 236.9 338.6
Expenses (216.4) (318.4)
Operating profit 20.5 20.2
Finance costs (0.3) (0.2)
Profit before tax 20.2 20.0
Tax (4.8) (3.8)
Profit after tax of discontinued operation 15.4 16.2
Loss on disposal (255.6) -
(Loss) / profit from discontinued operation (240.2) 16.2
Exchange differences on translation of discontinued operation 117.7 0.4
Other comprehensive (loss) / income from discontinued operation (122.5) 16.6
Net cash inflow from operating activities 21.1 12.6
Net cash outflow from investing activities (2.3) (1.5)
Net cash outflow from financing activities (1.4) (1.3)
Net increase in cash generated from discontinued operation 17.4 9.8
Details of the sale of the operation
Six months to
30 Jun 2022
£m
Disposal proceeds, net of disposal costs (1.9)
Net assets disposed of (154.7)
Loss on disposal before reclassification of foreign currency translation (156.6)
reserve
Recycling of foreign currency translation reserve (99.0)
Loss on disposal (255.6)
Consideration received, net of disposal costs paid -
Cash & cash equivalents disposed of (32.5)
Net cash outflow on disposal of business (32.5)
The Group also received £0.2m of deferred proceeds from UK retail sites
disposed of in 2021.
In 2021, the Group continued to reduce its retail operations and disposed of
its Toyota and Audi retail business in St Petersburg, Russia, generating
disposal proceeds of £110.0m. In Belgium, the Group disposed of three retail
sites, generating disposal proceeds of £1.9m and two sites in the UK,
generating disposal proceeds of £5.8m. The Group also disposed of its Retail
business in Luxembourg in January 2021 for £4.7m.
None of these disposals were material enough to be shown as discontinued
operations on the face of the consolidated income statement as they did not
represent a major line of business or geographical area of operations.
11 FINANCIAL RISK MANAGEMENT
A. Financial risk factors
Exposure to financial risks comprising market risks (currency risk and
interest rate risk), funding and liquidity risk and counterparty risk arises
in the normal course of the Group's business.
During the six months to 30 June 2022, the Group has continued to apply the
financial risk management process and policies as detailed in the Group's
principal risks and risk management process included in the Annual Report and
Accounts 2021. The condensed consolidated interim financial statements do not
include all financial risk management information and disclosures required in
the annual financial statements and further details can be found in the Annual
Report and Accounts 2021.
B. Credit risk
Credit risk represents the risk that a counterparty will not meet its
obligations leading to a financial loss for the Group. Credit risk arises from
cash and cash equivalents, trade receivables and other financial assets. The
Group monitors its credit exposure to its counterparties via their credit
ratings (where applicable) and through its policy of limiting its exposure to
any one party to ensure that they are within Board approved limits and that
there are no significant concentrations of credit risk. Group policy is to
deposit cash and use financial instruments with counterparties with a
long-term credit rating of A or better, where available. The concentration of
credit risk with respect to trade receivables is very limited due to the
Group's broad customer base across a number of geographic regions and the
historically low default loss percentage incurred by the Group. Even in light
of COVID-19 and its impact on economic conditions and the uncertainty it has
created, the Group's credit risk has not been significantly affected.
C. Liquidity risk
As at 30 June 2022, the committed funding facilities of the Group comprised a
syndicated revolving credit facility of £700m (31 December 2021 - £700m) and
sterling Private Placement loan notes totalling £210m (31 December 2021 -
£210m). As at 30 June 2022, £nil of the £700m syndicated revolving credit
facility was drawn (31 December 2021 - £nil).
In February 2019, the Group entered into a syndicated revolving credit
facility of £700m with an initial expiry date of February 2024 and options,
at lender discretion, to extend until 2026. Lenders approved the 1st extension
option in February 2020 resulting in the £700m commitment extending to 2025.
Lenders with total commitments of £620m approved the 2nd extension option in
February 2021, resulting in £620m of commitments being further extended to
2026.
The committed bank facilities and Private Placement borrowings are subject to
the same interest cover covenant based on an adjusted EBITA measure to
interest on consolidated borrowings measured on a trailing 12-month basis at
June and December. The Group is required to maintain a ratio of not less than
three to one and was compliant with this covenant as at 30 June 2022.
D. Vehicle funding arrangements
The Group finances the purchase of new vehicles for sale and a portion of used
vehicle inventories using vehicle funding facilities provided by various
lenders including the captive finance companies associated with brand
partners. Such arrangements generally are uncommitted facilities, have a
maturity of 180 days or less and the Group is normally required to repay
amounts outstanding on the earlier of the sale of the vehicles that have been
funded under the facilities or the stated maturity date. Amounts due under
these vehicle funding arrangements are included within trade and other
payables in the consolidated statement of financial position. Related cash
flows are reported within cash flows from operating activities in the
consolidated statement of cash flows. As at 30 June 2022, the total amount
outstanding under such arrangements was £1,167.1m (31 December 2021 -
£851.0m).
Vehicle funding facilities are subject to SONIA (or similar) interest rates.
The interest incurred under these arrangements is included within finance
costs in the consolidated income statement and reported as stock holding
interest (see note 5). Related cash flows are reported as interest paid in the
consolidated statement of cash flows.
E. Fair value measurements
In accordance with IFRS 13, disclosure is required for financial instruments
that are measured in the consolidated statement of financial position at fair
value. This requires disclosure of fair value measurements by level for the
following fair value measurement hierarchy:
· quoted prices in active markets (level 1);
· inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly (level 2); or
· inputs for the asset or liability that are not based on observable market
data (level 3).
The following table presents the Group's assets and liabilities that are
measured at fair value:
As at 30 June 2022 As at 31 December 2021
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£m £m £m £m £m £m £m £m
Assets
Derivatives used for hedging - 44.2 - 44.2 - 27.6 - 27.6
Financial assets at fair value through other comprehensive income 0.8 - 4.5 5.3 0.5 - 4.5 5.0
0.8 44.2 4.5 49.5 0.5 27.6 4.5 32.6
Liabilities
Derivatives used for hedging - (89.8) - (89.8) - (31.9) - (31.9)
- (89.8) - (89.8) - (31.9) - (31.9)
Level 1 represents the fair value of financial instruments that are traded in
active markets and is based on quoted market prices at the end of the
reporting period.
The fair value of financial instruments that are not traded in an active
market (level 2) is determined by using valuation techniques which include the
present value of estimated future cash flows. These valuation techniques
maximise the use of observable market data where it is available and rely as
little as possible on entity specific estimates.
Level 3 primarily represents the Group's equity interest in Hino Motors
Manufacturing Company SAS. Fair value is based on discounted free cash flows,
using the projection of annual income and expenses mainly based on historical
financial figures.
Derivative financial instruments are carried at their fair values. The fair
value of forward foreign exchange contracts and foreign exchange swaps
represents the difference between the value of the outstanding contracts at
their contracted rates and a valuation calculated using the spot rates of
exchange and prevailing forward interest rates at 30 June 2022.
The Group's derivative financial instruments comprise the following:
Assets Liabilities
As at As at As at As at
30 Jun 2022 31 Dec 2021 30 Jun 2022 31 Dec 2021
£m £m £m £m
Forward foreign exchange contracts 44.2 27.6 (89.8) (31.9)
12 ASSETS HELD FOR SALE
As at As at
30 Jun 2022 31 Dec 2021
£m £m
Assets held for sale 5.4 4.8
Assets held for sale relate to a surplus property which is actively marketed
with a view to sale.
13 OTHER DISCLOSURES
A. Related parties
There have been no material changes to the principal subsidiaries and joint
ventures as listed in the Annual Report and Accounts for the year ended
31 December 2021, except for the disposal of those subsidiaries that formed
the Group's businesses in Russia and the Group investing in businesses in
Chile and the Caribbean.
All related party transactions arise during the ordinary course of business
and are on an arm's length basis.
There were no material transactions or balances between the Group and its key
management personnel during the six months to 30 June 2022.
B. Contingencies
Franked Investment Income Group Litigation Order
Inchcape is a participant in an action in the United Kingdom against HM
Revenue and Customs in the Franked Investment Income Group Litigation Order
("FII GLO"). As at 30 June 2022 there were 17 corporate groups in the FII GLO.
The action concerns the treatment for UK corporate tax purposes of profits
earned overseas and distributed to the UK. As previously reported, the Supreme
Court referred the test case back to the High Court to establish when the
claimant in the test case could reasonably have discovered its mistake about
the UK tax treatment of such profits. The case has now been listed to be heard
by the High Court in November 2023.
Accordingly, the resolution of the test case remains incomplete. As at 30 June
2022, no further receipts have been recognised in relation to the balance of
Inchcape's claim due to the uncertainty of the eventual outcome given that the
test case has not yet been completed nor has Inchcape's specific claim been
heard by the Courts.
14 FOREIGN CURRENCY TRANSLATION
The principal exchange rates used for translation purposes are as follows:
Average rates Period end rates
30 Jun 2022 30 Jun 2021 31 Dec 2021 30 Jun 2022 30 Jun 2021 31 Dec 2021
Australian dollar 1.81 1.81 1.84 1.76 1.84 1.86
Chilean peso 1,070.80 1,001.40 1,043.46 1,118.04 1,015.72 1,152.93
Ethiopian birr 66.35 57.28 60.21 63.50 60.55 66.81
Euro 1.19 1.15 1.16 1.16 1.17 1.19
Hong Kong dollar 10.18 10.76 10.69 9.56 10.74 10.55
Russian rouble 108.85 103.5 101.6 78.92 101.16 101.43
Singapore dollar 1.77 1.85 1.85 1.69 1.86 1.82
US dollar 1.30 1.39 1.38 1.22 1.38 1.35
15 RESTATEMENT of prior period comparatives
Change in accounting policy relating to the recognition of configuration and customisation costs in respect of software
as a service
During 2021, the Group changed its accounting policy related to the
capitalisation of certain software costs. This change followed the IFRS
Interpretations Committee's agenda decisions published in April 2021 and
relates to the capitalisation of costs of configuring or customising
application software under 'Software as a Service' ('SaaS') arrangements. The
effect on the consolidated financial statements are further disclosed in the
accounting policies within the Annual Report and Accounts for the year ended
31 December 2021.
The principal restatements as a result of a change in accounting policy are
set out in the following tables. The tables show the adjustments recognised
for each individual line item as at 30 June 2021. Line items that were not
affected by the changes have not been included. As a result, the sub-totals
and totals disclosed cannot be recalculated from the numbers provided. Note
that the balance sheet restatement comparative is disclosed in the annual
report for the year ending 31 December 2021 and is therefore not provided
below.
The impacts on the consolidated income statement are:
Six months to IFRIC Six months to
30 Jun 21
£m 30 Jun 2021
(as reported)
(restated)
£m
£m
Revenue 3,587.9 - 3,587.9
Cost of Sales (3,080.6) - (3,080.6)
Gross Profit 507.3 - 507.3
Net operating expenses (450.0) (8.2) (458.2)
Operating profit 57.3 (8.2) 49.1
Finance income 6.6 - 6.6
Finance costs (22.6) - (22.6)
Profit before tax 41.3 (8.2) 33.1
Tax (30.6) (0.2) (30.8)
Profit for the period from continuing operations 10.7 (8.4) 2.3
Profit from discontinued operations 16.2 - 16.2
Profit for the period 26.9 (8.4) 18.5
The impacts on the consolidated statement of cash flows are:
Six months to IFRIC Six months to
30 Jun 2021 £m 30 Jun 2021
(as reported) (restated)
£m £m
Cash generated from operating activities
Cash generated from operations 278.5 (0.9) 277.6
Net cash generated from operating activities 225.4 (0.9) 224.5
Cash generated from investing activities
Purchase of intangible assets (6.0) 0.9 (5.1)
Net cash generated from investing activities 53.0 0.9 53.9
Cash and cash equivalents at the end of the period 644.8 - 644.8
16 EVENTS AFTER THE REPORTING PERIOD
On the 27 July 2022, the Group signed an agreement to implement a business
combination and acquire Derco, the largest automotive distributor in Latin
America.
17 ALTERNATIVE PERFORMANCE MEASURES
The Group assesses its performance using a variety of alternative performance
measures which are not defined under International Financial Reporting
Standards. These provide insight into how the Board and Executive Committee
monitor the Group's strategic and financial performance, and provide useful
information on the underlying trends, performance and position of the Group.
The Group's income statement and segmental analysis identify separately
adjusted items. These adjusted measures reflect adjustments to IFRS measures.
The directors consider these 'adjusted' measures to be an informative
additional measure of the ongoing trading performance of the Group. Adjusted
results are stated before adjusting items.
Adjusting items can include gains or losses on the disposal of businesses,
restructuring of businesses, acquisition costs, asset impairments and the tax
effects of these items. Adjusting items excluded from adjusted results can
evolve from one financial period to the next depending on the nature of
adjusting items or one-off type activities.
Constant currency
Some comparative performance measures are translated at constant exchange
rates, called 'constant currency' measures. This restates the prior period
results at a common exchange rate to the current period and therefore excludes
the impact of changes in exchange rates used for translation.
Performance Measure Definition Why we measure it
Adjusted gross profit Gross profit before adjusting items. A key metric of the direct profit contribution from the Group's revenue
streams (e.g. Vehicles and Aftersales)
Adjusted operating profit Operating profit before adjusting items. A key metric of the Group's underlying business performance.
Operating margin Operating profit (before adjusting items) divided by revenue. A key metric of operational efficiency, ensuring that we are leveraging global
scale to translate sales growth to profit.
Adjusted profit before tax Represents the profit made after operating and interest expense excluding the A key driver of delivering sustainable and growing earnings to shareholders.
impact of adjusting items and before tax is charged.
Adjusting items Items that are charged or credited in the consolidated income statement which The separate reporting of adjusting items helps provide additional useful
are material and non-recurring in nature. Refer to note 3. information regarding the Group's underlying business performance and is
consistent with the way that financial performance is measured by the Board
and the Executive Committee.
Net capital expenditure Cash outflows from the purchase of property, plant, equipment and intangible A measure of the net amount invested in operational facilities in the period.
assets less the proceeds from the disposal of property, plant, equipment and
intangible assets. Refer to note 17.
Free cash flow Net cash flows from operating activities, before adjusting cash flows, less A key driver of the Group's ability to 'Invest to Accelerate Growth' and to
normalised net capital expenditure and dividends paid to non-controlling make distributions to shareholders.
interests. Refer to note 17.
Return on capital Operating profit (before adjusting items) divided by the average of opening ROCE is a measure of the Group's ability to drive better returns for investors
employed (ROCE) and closing capital employed, where capital employed is defined as net assets on the capital we invest.
less net funds. Refer to note 7.
Net funds / (debt) Cash and cash equivalents less borrowings and lease liabilities adjusted for A measure of the Group's net indebtedness that provides an indicator of the
the fair value of derivatives that hedge interest rate or currency risk on overall balance sheet strength.
borrowings. Refer to note 9b.
Adjusted net cash Cash and cash equivalents less borrowings adjusted for the fair value of A measure of the Group's net indebtedness that provides an indicator of the
derivatives that hedge interest rate or currency risk on borrowings and before overall balance sheet strength and is widely used by external parties.
the incremental impact of IFRS16 lease liabilities. Refer to note 9b.
Constant currency percentage change Presentation of reported results compared to prior period translated using A measure of underlying business performance which excludes the impact of
constant rates of exchange. changes in exchange rates used for translation.
Organic growth Organic growth is defined as sales growth in operations that have been open A measure of underlying business performance which excludes the impact of
for at least a year at constant foreign exchange rate. acquisition and disposals in the period.
APMS: Reconciliation of income statement measures
Continuing operations Six months to Six months to
30 Jun 2022 30 Jun 2021 (restated)1
£m £m
Gross Profit 615.3 507.3
Add back: Adjusting items charged to gross profit - -
Adjusted Gross Profit from continuing operations 615.3 507.3
Less: Segment operating expenses (411.3) (370.7)
Adjusted Operating Profit from continuing operations 204.0 136.6
(Less) / add: Adjusting items 3.3 (87.5)
Operating Profit 207.3 49.1
Less: Net Finance Costs and JV losses (19.8) (16.0)
Profit Before Tax 187.5 33.1
(Less) / add: Adjusting Items (3.3) 87.5
Adjusted profit before tax from continuing operations 184.2 120.6
APMS: Reconciliation of cash flow measures
Six months to Six months to Six months to Six months to
30 Jun 2022 30 Jun 2022 30 Jun 2021 (restated)1 30 Jun 2021 (restated)1
£m £m £m £m
Net cash generated from total operating activities 287.1 224.5
Add back: Payments in respect of adjusting items 4.7 7.4
Net cash generated from operating activities, before adjusting items 291.8 231.9
Purchase of property, plant and equipment (24.3) (18.1)
Purchase of intangible assets (1.2) (5.1)
Proceeds from disposal of property, plant and equipment 7.5 5.5
Net capital expenditure (18.0) (17.7)
Net payment in relation to leases (29.8) (28.2)
Dividends paid to non-controlling interests (2.9) (1.8)
Free cash flow 241.1 184.2
Less: Free cash flow from discontinued operations (17.4) (9.8)
Free cash flow from continuing operations 223.7 174.4
APMS: Reconciliation of balance sheet measures
As at As at
30 Jun 2022 30 Jun 2021
£m £m
Adjusted operating profit from continuing operations 204.0 136.6
Adjusted operating profit for the previous 6 month period from continuing 144.8 115.5
operations
Adjusted operating profit from continuing operations on a 12 month basis 348.8 252.1
Net assets 1,137.4 1,159.4
Less: Net assets from discontinued operations - (83.7)
Net assets from continuing operations 1,137.4 1,075.7
Less: net funds (97.6) (101.9)
Add: net funds from discontinued operations - 8.6
Capital employed - continuing operations 1,039.8 982.4
Effect of averaging (28.7) 164.1
Average capital employed 1,011.1 1,146.5
Return on capital employed 34.5% 22.0%
As at As at
30 Jun 2022 31 Dec 2021
£m £m
Net funds from continuing operations 97.6 59.0
Add back: lease liabilities 341.2 311.7
Adjusted net cash from continuing operations 438.8 370.7
1. See note 15.
Independent Review report to Inchcape plc
Conclusion
We have been engaged by Inchcape plc ("the Company") to review the condensed
set of consolidated interim financial statements for the six months ended 30
June 2022 which comprises the consolidated income statement, consolidated
statement of comprehensive income, consolidated statement of financial
position, consolidated statement of changes in equity, consolidated statement
of cash flows and related notes 1 to 17.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of interim financial statements for the six
months ended 30 June 2022 is not prepared, in all material respects, in
accordance with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and consequently does
not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
As disclosed in note 1, the annual financial statements of the Group will be
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of consolidated financial statements included in
this interim financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE (UK), however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the interim financial report in
accordance with the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
In preparing the interim financial report, the directors are responsible for
assessing the Group's ability to continue as a going concern, disclosing as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the company or
to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the interim financial report, we are responsible for expressing
to the Group a conclusion on the condensed set of financial statement in the
interim financial report. Our conclusion, including our Conclusions Relating
to Going Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of this report.
USE OF OUR REPORT
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity" issued by the
Financial Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our review work, for this report, or for the conclusions
we have formed.
Deloitte LLP
Statutory Auditor
London, England
27 July 2022
Statement of directors' responsibilities
INTRODUCTION
The Directors confirm that the condensed consolidated interim financial
statements in the Interim Report have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial Reporting'
and that the Interim Report includes a fair review of the information required
by Disclosure and Transparency Rules 4.2.7R and 4.2.8R, namely:
· an indication of important events that have occurred during the first six
months and their impact on the condensed consolidated interim financial
statements;
· a description of the principal risks and uncertainties for the remaining
six months of the financial year; and
· material related party transactions in the first six months and any
material changes in the related party transactions described in the last
Annual Report.
The Directors and positions held during the period were as published in the
Annual Report and Accounts 2021. A list of current Directors is maintained on
the Inchcape plc website (www.inchcape.com).
On behalf of the Board
Duncan Tait
Group Chief Executive
27 July 2022
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