Inchcape Annual Report 2015

FY2015 Annual Report · Inchcape
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DRIVEN 
BY TRUST

Annual Report and Accounts 2015

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Inchcape plc is the global industry leader in the 
premium automotive Distribution and Retail sectors. 
We are present in 26 national markets and operate 
as a key strategic partner to the world’s foremost 
premium and luxury car brands for whom we 
provide an effective, well-ﬁnanced and customer-
centric route to market for vehicles and parts.

Strategic report
  2   Performance Highlights
  4   Business Model
  8   Our Value Chain

  10   Product Planning and logistics
  12   Brand Management
  14   New and Used Car Retailing
  16   Aftersales Servicing and Parts

  18   Chairman’s Statement
  20   Chief Executive’s Statement
  27   Key Performance Indicators
  28   Operating Review
  38   Principal Risks
  44   Corporate Responsibility Report

Governance
  48   Board of Directors
  52   Corporate Governance Report
  57   Committee Reports
  63  Directors’ Report on Remuneration
  78  Directors’ Report

Financial statements
  82  Consolidated income statement
  83  Consolidated statement of comprehensive income
  84  Consolidated statement of ﬁnancial position
  85  Consolidated statement of changes in equity
  86  Consolidated statement of cash ﬂows
  87  Accounting policies
  94  Notes to the ﬁnancial statements
 139  Five year record
 140  Report of the auditors – Group
 145  Company statement of ﬁnancial position
 146  Company statement of changes in equity
 147  Accounting policies
 149  Notes to the ﬁnancial statements
 158  Report of the auditors – Company

Other information
 160  Shareholder information

DISCOVER WHAT MAKES 
INCHCAPE DIFFERENT 
Read about our business model

4 — 7

A PROFESSIONAL  
ROUTE TO MARKET
Read more about our value chain

8 — 17

A VISION AND STRATEGY  
FOR THE FUTURE
Our CEO Stefan Bomhard sets out his strategic 
agenda for Inchcape to deliver superior returns 
for our stakeholders.

Read more about our new strategic agenda

20 — 26

Visit our website inchcape.com

 
 
 
 
Inchcape’s track record of performance continued in 2015.  
Our robust proﬁt growth was driven by our strong positions  
in a global portfolio of markets, trading across a diversiﬁed  
set of ﬁve revenue streams as a Distributor and Retailer for  
our leading OEM partners.

Building on this strong foundation and leveraging the opportunities 
we have identiﬁed from the changes underway in our industry, we 
have developed a new strategy for continued growth.

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DRIVEN  
BY TRUST

Our new strategy is underpinned by a new vision:  
to become the world’s most trusted automotive  
Distributor and Retailer. 

Trust underpins the virtuous circle that helps us to grow our 
business: building and maintaining the trust of our OEM 
partners creates new opportunities to gain the trust of our 
customers; gaining the trust of customers drives results that 
build and maintain the trust of our OEM partners. 

This is why we seek to embed trust as our highest priority  
at every stage of our value chain, from product planning  
to brand management, from car retailing to Aftersales. 

inchcape.com

1

 
 
ANOTHER YEAR OF ROBUST  
TRADING PERFORMANCE…
2015 HIGHLIGHTS

Building on our long-term record of success

Sales
£6.8bn

2014: £6.7bn

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Underlying operating margin*
4.7%

Adjusted earnings per share
52.1p

2014: 4.5%

2014: 50.2p

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* Excluding property proﬁts of  
£6.2m in Chile in 2013 and  
£17.3m in Singapore in 2014

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• Robust revenue growth of 7.8% and 
operating proﬁt growth of 10.3%, 
underlying at constant currency

• Strength from our diversiﬁed portfolio, 
including a strong performance by  
our Emerging Markets segment

• Growth in our high margin  

Aftersales operations

• Record New vehicle volume  

for Subaru in Australia

• Underlying operating margin  
expansion of 20 bps to 4.7%

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Operational successes

2

Inchcape Annual Report and Accounts 2015

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Another year of strong cash generation

Dividend per share
20.9p

2014: 20.1p

Cash returned to shareholders
£182.5m

Return On Capital Employed
30%

2014: £181.5m

2014: 26%

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Strategic highlights 

• Building on the Group’s strong 
fundamentals to stay ahead  
of our competitors

• Adapting to changes in the global 

automotive industry:
• Leading in customer experience
• Delivering the full potential from  

all our revenue streams

• Leveraging our strategic assets:

• Becoming vehicle manufacturers’ 

partner of choice

• Leveraging our global scale and 
investing to accelerate growth

inchcape.com

3

 
 
… DRIVEN BY THE UNIQUE GLOBAL 

PROPOSITION THAT DIFFERENTIATES US
OUR BUSINESS MODEL

Our business model brings together our core 
strengths that enable us to leverage our unique 
proposition in attractive, growing markets

1

STRONG GLOBAL 
POSITION

4
DIVERSIFIED 
REVENUE 
STREAMS

A UNIQUE BUSINESS 
MODEL

2
LEADING OEM 
BRAND 
PARTNERSHIPS

3
DISTINCT ROUTES  
TO MARKET

4

Inchcape Annual Report and Accounts 2015

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STRONG GLOBAL POSITION 

We have strong positions in 26 countries around the world. Our global portfolio is a fundamental strength  
of the Group, with a healthy balance between developed economies and emerging markets.

We have a leading presence with our high-margin, capital-light distribution model in small, medium and emerging 
markets where we have secured strong positions with our marketing expertise, customer-centric approach and 
technical capabilities. This is complemented by our scale retail presence in medium and large markets with our 
strong portfolio of premium brands.

Strong in Asia Paciﬁc, Selective in Emerging Markets, 
Scale in Developed Markets

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Operations – Group Trading Proﬁt %

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D.
D.

A.  UK .......................................................................................18%
1.  United Kingdom
B.  Europe .......................................................................... 5%
2.  Belgium
3.  Finland
4.  Greece
5.  Luxembourg
C.  North Asia ....................................................... 23%
6.  Guam
7.  Hong Kong
8.  Macau
9.  Saipan

D.  South Asia ........................................................15%
10. Brunei
11. Singapore
E.    Emerging Markets..........................14%
12. Bulgaria
13. Chile
14. China
15. Djibouti
16. Estonia
17. Ethiopia
18. Latvia
19. Lithuania

20. Macedonia
21. Peru
22. Poland
23. Romania
24. Russia
F.   Australasia .................................................... 25%
25. Australia
26. New Zealand

inchcape.com

5

 
 
OUR BUSINESS MODEL CONTINUED

2

LEADING OEM BRAND PARTNERSHIPS 

 We have strong and long-standing relationships with the world’s leading OEM (Original Equipment 
Manufacturer) groups. These OEMs are the world’s main drivers of automotive innovation, new fuel 
technologies, powertrain developments, safety breakthroughs and cutting edge engineering. 

Our partnerships provide us with an attractive line-up of models across the world. And by consistently 
focusing on the core needs of our OEM partners, we seek to build and deliver ever-deeper relationships, 
outstanding brand representation and strength in market share.

Long-standing relationships with the world’s 
leading OEM groups

OEM partners: at the forefront 
of industry innovations
The OEM partners for whom Inchcape 
delivers a best in class route to market 
are industry pioneers, delivering next 
generation technological and 
entertainment innovations and 
constantly adapting to meet the 
changing preferences and needs  
of the modern day consumer.

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Inchcape Annual Report and Accounts 2015

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DISTINCT ROUTES TO MARKET 

Market size, potential and dynamics determine the speciﬁc operating model we employ from country to country. 

In small and medium sized markets, as exclusive Distributor, 
we manage the entire value chain post the factory gate 
for our OEM partners. We are the OEM’s brand custodian  
in these countries, responsible for everything from importing 
vehicles and parts to all sales and marketing activities, 
including the appointment and management of the third 
party retail network. 

In larger, more developed markets, such as the UK, 
we operate our Retail model, with a focus on delivering 
a superior customer experience online and in our retail 
and service centres.

Details in Operating Review on page 28

Trading proﬁt split

Ret a il
22%

D
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78%
rib
ution

4

DIVERSIFIED REVENUE STREAMS 

Five distinct value drivers support Inchcape’s revenue and proﬁt performance throughout the economic cycle. 

We leverage opportunities from the New car market 
by selling New vehicles, Finance and Insurance  
products. And we simultaneously take advantage  
of the defensiveness of the growing global Car Parc  
(the total number of cars on the road) through Used 
vehicle sales, Aftersales Servicing and Parts.

Maintaining this balance prepares us well to respond  
to the full array of different market conditions and trends  
at play in all our local markets across the world.

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inchcape.com

7

 
 
 
 
 
 
 
INSIGHT AND EXPERTISE ACROSS THE 
AUTOMOTIVE VALUE CHAIN

OUR VALUE CHAIN

We operate across every link of the post-factory automotive 
value chain for our OEM partners, providing a highly efﬁcient, 
customer-focused route to market that delivers shared 
rewards at every stage.

PRODUCT PLANNING AND LOGISTICS

BRAND MANAGEMENT

Our in-depth knowledge of local markets, 
customer preferences and trends 
enables our OEM partners to beneﬁt 
from our insights and understanding 
throughout the entire planning process.

Under our Distribution model, we take on 
total responsibility for our OEM partners’ 
brands, marketing and sales operations in 
our local markets – we handle every aspect 
of the customer interface from appointing 
and managing the dealer network to 
advertising and social media management.

Page 10

Page 12

Product speciﬁcation
We work closely with our OEM partners for several 
years before a new model is launched, providing 
clarity throughout the planning process as our view 
of market pricing, local ﬁt requirements and sales 
volumes gains precision.

Import and logistics
Our global oversight of distribution by land or sea, 
allied with comprehensive local port or border-to-
showroom capabilities, removes all logistical 
burdens from our partners.

Appoint and manage the dealer network
Where we operate as a Distributor, we select and 
appoint an independent dealer network that has  
the best ﬁt with our partners’ brands; training and 
managing them to meet the demanding standards  
of our customer-focused ethos. Further, we typically  
own and operate 15-20% of the network ourselves.

National marketing and price positioning
We are scrupulous in projecting our partners’ brand 
values and personality in all local marketing and 
communications support, reﬁning messages where 
necessary to maximise positive impact in speciﬁc 
markets. Our approach to price positioning is based  
on in-depth knowledge of market trends and 
competitor pricing.

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Inchcape Annual Report and Accounts 2015

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NEW AND USED CAR RETAILING

AFTERSALES

The Inchcape approach to retailing 
revolves around creating and managing 
customer life-cycles. Following initial 
engagement, through digital and physical 
channels, we seek to create long-term 
ongoing relationships involving multiple 
New and Used car sales.

Our commitment is to never undertake 
service work without our customers’  
prior agreement. This, together with our 
investment in state-of-the-art facilities  
and expertise of our highly trained 
technicians, ensures we become  
the ﬁrst choice for Aftersales care.

Page 14

Page 16

Vehicle sales
We aim to provide the best New and Used car  
buying experience in our retail centres across the 
world. Our people have a depth of expertise and  
a wealth of product knowledge to ensure we can 
deliver on this aim.

Customer engagement and retention
After initial customer engagement, we aim  
to deepen relationships via a wide range of 
sophisticated retail techniques including tailored 
social media campaigns, loyalty strategies, rapid  
web response, opportunities with afﬁnity partners  
and more.

Vehicle ﬁnance and insurance
Close relationships with ﬁnancial services  
businesses across the world mean we can  
provide customers with attractive, transparent  
means of vehicle ﬁnancing.

Servicing
Our ultimate focus is on getting it right ﬁrst time, 
every time – from the quality of a routine service  
to ﬁxing a problem, this is the most certain way  
of retaining our customers and best representing 
our partners’ brands.

Parts
Our strong OEM relationships and specialist 
wholesale capabilities make Inchcape the 
preferred provider of high-quality, genuine  
parts and accessories.

inchcape.com

9

 
 
OUR VALUE CHAIN CONTINUED

PRODUCT PLANNING AND LOGISTICS

TRUSTED 
KNOWLEDGE

“It is very rewarding to see our OEM partner Fuji Heavy Industries 
relying on our local market knowledge and expertise to develop 
Subaru products that are entirely appropriate for our local market 
– it’s a real partnership that only works because they trust us.”

— Nick Senior, Managing Director, Inchcape Subaru Australia

Product speciﬁcation
Inchcape plays a unique role at this stage in the automotive 
value chain. Far from being solely involved in physical 
Distribution and Retail, we work with our OEM partners,  
like Fuji Heavy Industries, sometimes years before a model is 
launched, providing essential insight to ensure that the right 
product is delivered to market at the right time. Our presence 
in 26 countries gives our partners the local expertise to target 
and reﬁne models and special editions to meet tailored 
needs, tastes and trends.

Planning becomes increasingly precise as the process 
progresses. In Greece, for example, where we handle 
Distribution for Toyota and Lexus, a tentative pricing  
proposal is challenged and perfected via in-depth  
customer and competitor research before a ﬁnal price  
is negotiated and agreed.

These processes transfer trustworthy local knowledge and 
insight to our OEM partners to generate a competitive 
advantage and grow market share.

Supporting a pan-European  
Hybrid strategy

Supporting 
Toyota’s 
pan-European 
Hybrid strategy 
and our own 
commitment  
to enhancing 
the customer 
experience,  
we developed  

a unique special edition in Greece with 
Toyota. The Yaris Hybrid ‘Black and Red’ 
contributed strongly to signiﬁcantly 
improved market share throughout  
2015, despite the challenging  
economic environment. 

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Inchcape Annual Report and Accounts 2015

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Import and logistics 
Right across the world, Inchcape works closely with OEM 
partners to ensure a seamless, end-to-end vehicle preparation 
and delivery process that ensures the right car reaches the 
right outlet at the right time to meet manufacturer, dealer  
and end-customer requirements. 

In the markets where we operate this Distribution model,  
we completely remove the burden of logistics from the  
OEM, so that each party can beneﬁt from focusing on  
its core strengths.

Performance data to drive  
response times

As well as 
managing all 
port-to-outlet 
logistics for 
vehicles and 
parts, our 
specialist 
AutoNexus 
division in 
Australia also 

facilitates the build of limited editions in 
local ﬁt. In addition, we provide OEM 
partners with full transparency and access 
to performance data that enables them  
to respond decisively and accurately  
to changing market conditions and 
consumer trends.

inchcape.com 11

 
 
OUR VALUE CHAIN CONTINUED

BRAND MANAGEMENT

A TRUSTED 
CUSTODIAN

“We go to enormous lengths to create strong brand equity for our  
OEM partner, Toyota, by translating brand values into visible customer 
beneﬁts. We constantly educate and support our third party dealer 
network, in accordance with our customer focused philosophy to 
enable them to deliver a stand-out customer experience and grow 
market share.”

— Eleanna Vitta, Marketing Director (left), and Eirini Flouda, e-Business Manager, Toyota Hellas

Our Distribution model 
Under Inchcape’s Distribution model, we are trusted to take  
on complete responsibility for our OEM partners’ sales and 
marketing operations in a particular country, providing them 
with an end-to-end ‘route to market’ solution. 

Appoint and manage the dealer network 
This includes the appointment and management of the 
dealer network to complement our own retail centres.  
We work with dealers that are a best ﬁt for our OEM partner 
brands, and manage and train the network to ensure the 
highest standards of customer service across the entire 
relationship with us.

A winning relationship for Toyota, Greece

At every stage of the 
relationship, our work for 
Toyota in Greece involves 
ensuring that the end 
customer is the focus of 
everything we do. For this 
reason, we tightly control all 
marketing communications, 
including digital and online 
activities, to ensure that the 

customer truly understands the quality, caring and 
trustworthy ethos behind the Toyota brand.

This extends to the showroom and the Aftersales  
arena, where we ensure that our people have all the 
knowledge – including of competitor models – that is 
required to be able to support customer needs. We train 
all customer-facing staff throughout the retail network 
precisely how to talk to customers on behalf of Toyota.

The power of the Toyota brand – built steadily throughout 
the years on the notions of ‘Quality-Durability-Reliability’, 
‘Innovative Technologies’ and ‘Value for Money’,  
ensures our leading performance, despite the fact  
that some competitor brands may have a perceived 
price advantage. 

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Inchcape Annual Report and Accounts 2015

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National marketing campaigns

Finland

In Finland, where we are the 
Distributor for Jaguar Land Rover, 
for the launch of the new Jaguar 
XE, we undertook a highly 
targeted digital direct marketing 
programme along with social 
media, print and web campaign 
and events aimed at owners of 
competitor vehicles. Our local 

marketing team were speciﬁc on the demographic proﬁle  
to target, for whom they additionally identiﬁed that personal 
recognition along with product image and design were 
highly important. The programme successfully captured  
90% of sales from competitor brands.

Hong Kong

In Hong Kong, we created a 
campaign for the Toyota Noah,  
a small people carrier. Our 
objective was to create 
resonance with our target 
audience – fathers – by riding  
on the emotional transition from a 
single man to family man and by 
recognising their unconditional 
love and support for their family. Our local marketing team 
set out to project a new image of a family man that can be 
‘cool’ with a Noah by creating a viral video – “Salute to Dad” 
and reinforcing the emotional beneﬁts of the model. Noah 
achieved the No.1 best-selling passenger car model in  
Hong Kong in 2015.

National marketing and price positioning
The automotive sector contains some of the most prestigious 
consumer brands in the world. As exclusive Distributor, we 
have earned the trust of our OEM partners to be their brand 
custodian in our markets.

We scrupulously project our OEM partners’ brand values  
and personality in all our national marketing campaigns  
and communications, using our own market insight to reﬁne 
messaging and pricing strategies, and maximise the potential 
market opportunity.

From print and TV campaigns to a highly responsive digital 
and social media presence, Inchcape manages every 
aspect of the customer interface on behalf of the OEM.

inchcape.com 13

 
 
OUR VALUE CHAIN CONTINUED

NEW AND USED CAR RETAILING

A TRUSTED 
RETAILER

“We know that buying a vehicle, New or Used, is a huge 
decision. We aim to build our customers’ trust over the  
long term over many purchases, simply by making sure  
we never give them even the slightest reason to consider 
going elsewhere.”

— Peter Eaton, Franchise Director Jaguar Land Rover, Inchcape UK

Vehicle sales 
Customers look for more than a transaction whenever they choose 
to engage with us and we are driven by our desire to deliver the 
very best buying and ownership experience across New and Used 
cars on behalf of our OEM partners. This is only possible when we 
build a relationship based on trust.

Major structural changes are transforming the automotive retail 
environment and customers have now made much of their buying 
decision before they set foot in the retail centre. While we actively 
engage with customers in this ‘pre-purchase digital phase’, we  
also recognise that the retail centre visit itself remains a critical 
‘moment of truth’. Indeed, with fewer visits now being made to  
the retail centre by individual customers before they make the  
ﬁnal buying decision, arguably it makes the retail centre 
experience even more important.

Our rigorous retail standards underpin our commitment to 
delivering consistently superior customer service at every stage.  
It also protects the pricing power of our brands, helps us to grow 
market share for our OEM partners and creates a loyal customer 
base for our Aftersales businesses.

An exceptional retail experience –  
UK BMW Reading

During 2015 we 
worked closely 
with our OEM 
partner BMW to 
invest in a new 
state-of the-art 
retail facility, 
Cooper 
Reading.

Ofﬁcially opened in September 2015, and 
now the biggest BMW and MINI Centre  
in the UK, the new site is spread over  
three storeys dedicated to amplifying  
the BMW brand proposition and providing 
exceptional levels of customer service.

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Joining the data dots to improve 
customer contact strategy in the UK
During 2015  
we reviewed 
our customer 
contact strategy 
in the UK  
to ensure it was 
aligned with our  
customers’ 
expectations.

We conducted focus groups, gathered 
insights and used data from experience 
surveys to inform our strategy and identify 
what is most important for our customers. 

From this valuable research we were able to 
create timely and relevant communications 
tailored to preferred contact methods, 
always working closely with our OEM 
partners to ensure that they were engaged 
in the process.

We have seen improvements in  
customer feedback since this review  
and are continuing to reﬁne our  
strategy to consistently improve  
the customer experience. 

Customer engagement and retention

Our existing customers provide us and our OEM partners with  
endless opportunities for more business over the long term. 

Increasingly, data is at the heart of our engagement strategies, 
ﬁnding out all we can – both through conversation and formal 
research – about our customers such that we can serve them  
with an individual and personalised experience.

Knowing how to ﬁnd, reﬁne, understand and leverage data is 
fundamental to customer lifecycle management. We strive to be  
at the forefront of non-intrusive data usage at many points of the 
customer interface – face-to-face in the showroom, via social media, 
SMS and email, on our websites and through our increasingly 
sophisticated contact centres, to gain a complete overview of each 
customer regardless of which channels and contact points they have 
used in the past.

Vehicle ﬁnance and insurance

Our global scale and reach give us the purchasing power to 
negotiate special terms with ﬁnancial institutions. In addition, we 
beneﬁt from our OEM partners’ close relationships with banks and 
insurers, which we too can leverage on our customers’ behalf.

As a result, we are able to offer our customers highly competitive 
ﬁnance rates, giving us a clear source of competitive advantage.

The ability to provide a competitive credit or insurance package  
can make all the difference to a customer’s vehicle purchasing 
experience and decision.

inchcape.com 15

 
 
OUR VALUE CHAIN CONTINUED

AFTERSALES SERVICING AND PARTS

TRUSTED 
EXPERTS

“Getting a service or repair right ﬁrst time is just the 
starting point – we just love going that extra step  
to try to make customers actually look forward  
to bringing their car in for a service.”

— Thong Chee Wah, Technician, Borneo Motors Toyota

Servicing and parts
Aftersales is a key defensive revenue stream for the Group 
and drives approximately half of the Group’s proﬁts. The 
margins in this area are very attractive, which makes territories 
where we have built market share over a number of years 
particularly proﬁtable for us. In Hong Kong, for example, 
around one third of the existing vehicles on the road are 
brands we distribute, amounting to close to 244,000 units.  
This illustrates how a ﬂourishing Aftersales business enables 
even relatively small markets to deliver large proﬁts for us.

Our focus is on customer contact and retention programmes, 
both up to and beyond warranty expiry. Rigorous, customer-
centric sales processes are in place alongside the daily 
capture of customer metrics including service and repair 
bookings, hours sold and workshop productivity.

Typically, the industry experiences a high proportion of 
Aftersales customers leaving franchised centres once the 
vehicle warranty expires. Our approach is to concentrate 
additional marketing resource on customer retention, 
highlighting the tangible value of our state-of-the-art onsite 
equipment, live links to manufacturer diagnosis and resolution 
systems, and the top level of training our operatives receive 
directly from our OEM brand partners. In our Singapore 
business for example, this approach has resulted in a 
signiﬁcant increase in the number of customers who make us 
responsible for their vehicle servicing for six years and more.

We also leverage our industry-leading service standards, 
based on our complete transparency with customers,  
which ensures we undertake no work without their prior 
agreement and understanding. In this way, we build trust  
and demonstrate that there is no better place to go than an 
Inchcape service centre throughout the entire life of a vehicle.

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Audi Division in the UK works to deliver world-class 
Aftersales experience

Toyota ME Programme  
in Singapore

The Inchcape Audi Division has been 
working in close partnership with our 
OEM partner to train our Service teams 
to deliver an outstanding Aftersales 
experience for our customers.

 We work with Audi on their Aftersales 
accreditation programme, which is 
designed to provide a high level of 
competency amongst Audi teams and 
deliver a high level of customer service. 

Our Service teams have also been trained to make high quality 
videos for our Aftersales customers using the ‘Audi Cam’ service, 
which has been designed to make it easier for customers to see 
what work is required for their car and hear this directly from our 
specialist, trained technician who has carried out the work. We 
receive highly positive feedback on this service from many of  
our customers. 

Toyota ME, which 
stands for ‘My 
Experience’, is 
our unique online 
experiential loyalty 
rewards programme 
which allows customers 
to earn Toyota ME 
points for every dollar 
spent at one of our 

authorised Toyota Service and Bodycare Centres. 
These points can be redeemed in various ways, 
from ofﬁcial merchandise to a 24-hour drive  
away experience.

The programme has helped to forge lasting 
relationships with customers built around the 
delivery of a truly personalised service which  
takes the stress out of the post-sale and servicing 
process. Our customers feel valued as part of  
a programme which rewards them based on 
criteria going beyond simply a transactional 
relationship, bringing enhanced engagement  
and an improved customer retention rate.

inchcape.com 17

 
 
CHAIRMAN’S STATEMENT
LONG-TERM VALUE
CREATION

“I am pleased that the Group has again 
demonstrated its solid fundamentals with 
another year of robust proﬁt growth. Our 
new strategic objectives put us on a clear 
path for future success and will enable us 
to continue driving performance, with long-
term value creation for our shareholders”

18

Inchcape Annual Report and Accounts 2015

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Inchcape is part of an exciting and evolving industry, within 
which we have a strong portfolio of markets and OEM 
partners. We have operated in many of our markets for 
signiﬁcant periods of time and we have a proven track record 
of being able to adapt ahead of our competition and build 
on the strength of our positions. The automotive industry is 
undergoing changes on multiple fronts, all of which we are 
very mindful, as we seek to protect and strengthen our 
businesses. However, despite all the change occurring, there  
is one important constant – the importance for automotive 
manufacturers to have a trusted partner providing a route  
to market for both Distribution and Retail. Here, our expertise 
and global reach differentiates us and our relationships will 
be solidiﬁed even further as part of the strategy outlined by 
Stefan Bomhard in his CEO’s statement. 

The Group is fortunate to have an outstanding management 
team, led by Stefan who has seamlessly integrated into 
Inchcape. Inchcape’s success is only possible due to the 
quality of its people, and I would like to thank all of our 
ﬁrst-class colleagues for their dedication and hard work 
during the year. 

After 16 years with Inchcape, 2015 marked the last full year  
of John McConnell being with the Group. On behalf of the 
Board, I would like to thank John for the contribution he has 
made to Inchcape’s success. His expertise and insight as  
both Group Finance Director and a member of the Board 
have been invaluable and he leaves behind a strong team.  
It has been a pleasure to work alongside John. I am sure I 
speak on behalf of everyone at Inchcape in thanking him  
for his years of dedicated service and wishing him well for  
the future.

I am delighted with the appointment of Richard Howes as the 
Group’s new Chief Financial Ofﬁcer. Richard will take up his 
appointment and join the Inchcape Board on 11 April 2016.

Richard is joining from the position of Chief Financial Ofﬁcer at 
Coats Group plc, the leading industrial thread and consumer 
textile crafts business, with operations in over 70 countries 
across six continents. 

Richard has gained a wealth of experience across the 
ﬁnancial and commercial sectors, working for multi-site 
businesses with substantial global footprints. His strong track 
record of leading ﬁnance functions across different sectors  
at a number of international public companies will make 
Richard a very valuable addition to the Group. 

Performance
Group sales increased by 2.0% to £6.8bn for the full year to  
31 December 2015. Our 2015 constant currency like for like 
revenue growth of 9.0% reﬂected a stronger performance  
in the second half of the year. 

2015 saw a continuation of the Group’s trading momentum, 
supported by broad based growth across our markets and 
revenue streams. 

Group proﬁt before tax and exceptional items of £312.1m  
was up 2.9% on 2014, and excluding the property proﬁt in 
Singapore of £17.3m in 2014, the underlying increase was 9.2%.

Due to further weakness in the Russian economy, we have 
recorded a £49.5m non-cash exceptional impairment of  
the value of the goodwill in Russia.

Adjusted earnings per share (EPS) rose by 3.8% to 52.1p. 

Cash generated from operations during the year was 
£328.4m, which represents a 101% conversion of pre-
exceptional operating proﬁt. 

For the third year in succession, we announced a £100m 
share buy back programme at the time of our Interim  
Results, with £41m completed by 31 December 2015 and the 
remainder scheduled to be completed during the ﬁrst half  
of 2016. The Group’s cash generation continues to be strong, 
beneﬁting from our well-established disciplines over working 
capital. The Group generated £177.6m of free cash ﬂow in  
the year and had £166.4m of net cash at the year end. 

Board
I would like to thank Simon Borrows and Vicky Bindra,  
who both stepped down as Non-Executive Directors in  
2015, for their great support and contributions to the  
Board. We were pleased to announce the appointment  
of Nigel Stein who joined the Board on 8 October 2015.  
Nigel brings signiﬁcant global automotive expertise  
and is an excellent addition to the Board; he is a  
member of the Audit and Nominations Committees.

Dividend
The Board is pleased to recommend payment of a ﬁnal 
dividend for the year ended 31 December 2015 of 14.1p, 
+2.2% on 2014 (13.8p). This gives a total dividend for 2015  
of 20.9p, a 4.0% increase on 2014 (20.1p). Subject to approval 
at the Company’s Annual General Meeting (AGM) on  
26 May 2016, the ﬁnal dividend will be paid on 24 June 2016 
to shareholders of the Company on the register of members 
at the close of business on 27 May 2016.

Outlook
The Group has strong fundamentals and is well positioned 
against a backdrop of some question marks on the global 
growth outlook. These include the position in the cycle  
in some large developed markets, which have returned  
to previous peaks, the reduction in growth rates in many 
emerging markets and a number of ﬁscal and political issues. 

I am conﬁdent that we have the right team and  
the right strategy to deliver good long-term performance  
for our stakeholders. While our performance will, as ever, be 
inﬂuenced by external factors, the importance of positioning 
the Group correctly to seize growth and control our own 
destiny is even greater than usual.

KEN HANNA

Chairman

inchcape.com 19

 
 
CHIEF EXECUTIVE’S STATEMENT
A VISION AND 
STRATEGY FOR  
THE FUTURE

The Group saw broad based 
growth across our portfolio  
of 26 geographic markets. 

20

Inchcape Annual Report and Accounts 2015

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A vision and strategy for the future
I am delighted to be writing my ﬁrst annual letter to 
shareholders as the CEO of Inchcape. It has been an 
energising ﬁrst year and I am excited about the future.  
I am especially pleased to be able to introduce another 
successful set of results. 

Insight and observations
I will comment on the strengths and challenges I initially 
perceived at Inchcape that persuaded me to join the Group 
a year ago, and I will then share with you my impressions of 
the organisation and outline my and the Executive team’s 
ambitions for its future. 

The Group maintained robust trading momentum throughout 
2015, gathering pace as the year progressed to deliver, as we 
anticipated, a better second half than ﬁrst. We saw broad 
based growth across our portfolio of 26 geographic markets 
and our full range of revenue streams – New and Used vehicle 
sales, Finance & Insurance products, Aftersales Servicing and 
Parts – as we leveraged our OEM brand partners’ continuing 
lead in technology and innovation. 

It was particularly pleasing to deliver growth in our high-
margin Aftersales business as we reap the beneﬁt from the 
New vehicle growth in many of our markets in recent years. 

We saw a number of strong performances from many of our 
operations around the world. In Singapore, our operations 
beneﬁted from the increased quota of Certiﬁcate of 
Entitlement (COE) licences, which led to a signiﬁcant 
year-on-year growth in the New vehicle market. We also 
performed well in Australasia, where we gained share in a 
growing market and beneﬁted from the successful launches 
of the Subaru Outback and Liberty models. Further, we grew 
market share for our OEM partners in Hong Kong and Greece.

Performance was also strong in Emerging Markets, particularly 
Ethiopia where our business gained from the structural growth 
of the middle class and beneﬁted from investments made in 
recent years. Despite a 35.7% decline in the Russian New car 
market, we again demonstrated our resilience to achieve 
improved gross margins on vehicles and growth in our 
Aftersales operations.

Our UK business delivered a robust top-line performance, 
driven by good consumer conﬁdence and attractive offers 
from the OEMs. Pressure on Used vehicle margins for some  
of our brands in the UK, however, limited our ability to realise 
the full potential of this revenue trend into proﬁt. 

Our commercial performance enabled us to make important 
investments in our continued future success, including our 
new state-of-the-art Cooper Reading retail centre, the largest 
BMW centre in the UK; our new 60,000 square feet body and 
paint workshop for Toyota/Lexus in Pandan, Singapore; and 
our new Yuen Long Hino retail centre in Hong Kong.

I would like to recognise our Market CEOs and their teams  
for their important contributions to our strong 2015 results:  
Aris Aravanis, who was highly effective in his new role as  
CEO Continental Europe, growing further our strong  
market leadership in Greece; George Ashford, who  
led our Australasian business to a record performance;  
Louis Fallenstein, for the new impetus he brings to our UK 
organisation; Patrick Lee, for growing market share in North 
Asia and achieving the prestigious Toyota Triple Crown for 
market leadership in Hong Kong for the 24th year; Koh Ching 
Hong, for directing the strong contribution of our South Asian 
business; and Ruslan Kinebas, for grasping his new role as 
CEO Emerging Markets with such energy and determination. 

You will be able to read about our 2015 results in more  
detail from page 82 onwards in this report. They provide  
the backdrop against which I want to give you some insight 
into how we intend to build upon our recent successes in the 
years to come.

Pioneering spirit
I was impressed by the Group’s focus on the customer,  
which chimed closely with my own passionate commitment 
to customer service. I was also attracted by the Company’s 
rich history and pioneering spirit, as well as the truly global 
scale on which it operates. 

Further, I was drawn by the Company’s twin focus on  
business-to-business (B2B) and business-to-consumer  
(B2C) relationships, with vehicle manufacturers (OEMs)  
and end-customers respectively. This resonated with my  
own career so far, during which I have been immersed  
in both B2B and B2C relationships. I saw this as a great 
opportunity to have an impact on both at the same time.

So, how did my expectations compare with what I found 
during my ﬁrst few months in the role? 

I found a well-run company with strong capital discipline, 
rigorous controls and with a range of powerful assets: a 
Group that is for the most part successfully leveraging the 
potential of its business model, including its strength across 
both Distribution and Retail.

The Company has long-standing partnerships with many of 
the world’s leading automotive OEMs, those at the forefront  
of R&D, innovation and marketing impact. It has a customer-
centric focus, strong processes, a highly knowledgeable 
management team and a skilled workforce spread 
throughout its global markets. There is a disciplined culture, 
built around rigorous performance management. And 
underpinning this, the organisation has a strong balance 
sheet and an attractive set of diversiﬁed revenue streams  
to respond to every stage of the economic cycle.

As evidence of the Group’s deep-rooted strength, I found an 
organisation that has a track record of consistently delivering 
improved margins, proﬁts and dividends. 

Above all, I found a strong company of global scale with 
some unique competitive advantages and a diverse portfolio 
in many of the world’s most attractive markets.

So overall, I feel privileged to join such a great business and  
I am conﬁdent about the future strength of the Inchcape 
brand and organisation.

(continued on page 24)

CASE STUDY

The global auto market: driving growth  
in an omni-channel world
The global automotive industry is undergoing signiﬁcant 
change. Technology-driven trends are rapidly evolving 
customer behaviours and expectations. Digitisation, 
increasing automation, growing connectivity and the 
development of the smart car are just some of the 
structural forces aligning to satisfy changing consumer 
preferences. Our strategy focuses on leveraging 
opportunities from these exciting trends while building 
on Inchcape’s unique position as an independent, 
global multi-brand Distributor and Retailer.

inchcape.com 21

 
 
CHIEF EXECUTIVE’S REVIEW CONTINUED

As CEO, I am delighted to lead the Group 
Executive Committee – a diverse team of  
global leaders that brings together a wealth 
experience from a range of industries as well  
as deep local market knowledge with a focus  
on operational excellence. The Executive Team 
drives the vision and direction of the Company  
on behalf of the Board. 

I would like to extend my personal gratitude  
to John McConnell, our departing Group  
Finance Director, who has been in-post  
since 2009. John has been a lead  
contributor in the delivery of strong  
ﬁnancial results during a period of  
challenging macro-economic conditions  
around the world, which is a great testament  
to his skills and commitment. He leaves behind  
a very strong ﬁnance team, which is entirely 
ﬁt-for-purpose as we move into the next  
stage of the Group’s development. 

While personally I am sad that John has  
decided to return to his native Australia,  
I know that many people will join me  
in wishing him all the best for the future. 

I am delighted to welcome Richard Howes,  
our new Chief Financial Ofﬁcer, who joins  
us from Coats Group plc. Richard will join  
us on 11 April and will be a valuable  
addition to both our Board and our  
Group Executive Committee given  
his extensive international and M&A  
experience and wealth of knowledge  
across the ﬁnancial and commercial  
sectors in fast-paced environments.

22

Inchcape Annual Report and Accounts 2015

GROUP EXECUTIVE COMMITTEE

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Stefan Bomhard, Group Chief Executive, Inchcape plc: 
Stefan was appointed Group CEO in April 2015. Before joining 
Inchcape, Stefan was President of Bacardi Limited’s European 
region and was also responsible for Bacardi’s Global 
commercial organisation and Global Travel Retail.

John McConnell, Group Finance Director, Inchcape plc: 
John was appointed as Group Finance Director in October 
2009, having worked with the Group since 1999. John joined 
Inchcape Australasia as Chief Financial Ofﬁcer before moving 
to the role of Chief Executive Ofﬁcer of Australasia. John 
stepped down from the Board at the end of February 2016.

Aris Aravanis, Chief Executive Ofﬁcer, Continental Europe: 
In June 2015, Aris was promoted to CEO Continental Europe 
and has responsibility for Belgium, Luxembourg, Balkans and 
Greece. Previous to this, Aris was Managing Director, Greece 
and the Balkans. He joined the Group in 1991 and in 2000 
became General Manager, Deputy Managing Director and 
a member of the Board of Directors of Toyota Hellas.

George Ashford, Chief Executive Ofﬁcer, Inchcape 
Australasia: George was appointed as Chief Executive 
Ofﬁcer, Inchcape Australasia in January 2012. He joined the 
Group in March 2006 as Director of Implementation, 
Inchcape Advantage. In October 2006, George was 
appointed Managing Director, European Retail.

Stéphane Chatal, Group Chief Information Ofﬁcer: 
Stéphane was appointed as Chief Information Ofﬁcer in 2008 
and is responsible for the Group’s Information Systems 
strategy, its implementation and the IS function. 

Koh Ching Hong, Chief Executive Ofﬁcer, Inchcape South 
Asia: Ching Hong joined Borneo Motors in January 2008. He 
was appointed as Managing Director, Inchcape South Asia 
in August 2009 and is responsible for Borneo Motors and 
Champion Motors in Singapore and NBT in Brunei. 

Alison Clarke, Chief Human Resources Ofﬁcer: Alison 
joined Inchcape and the Executive Committee in 2015 from  
Mitie Group plc, where she was Transformation and Group 
People Director.

Louis Fallenstein, Chief Executive Ofﬁcer, Inchcape UK: 
Louis was appointed CEO of Inchcape UK in October 2015.  
A key member of Inchcape’s leadership team, Louis was 
most recently CEO of Emerging Markets and previous to that 
was Franchise Director for our UK BMW business, having been 
with Inchcape since the time of our acquisition of the EMH 
business in 2006. 

Ruslan Kinebas, Chief Executive Ofﬁcer, Emerging 
Markets: Ruslan joined Inchcape and the Executive 
Committee in 2015 from Mondelez International, where he 
was Area Vice President for North and West Africa and Turkey.

Ken Lee, Chief Marketing and Communications Ofﬁcer: 
Ken joined the Group in September 2003 as Marketing 
Director for the UK businesses. In 2006 he was appointed 
Customer Strategy Director and later that year was 
appointed to the Executive Committee as Group 
Communications Director with global responsibility for 
internal and external communications. In August 2013, Ken’s 
role was extended to include leadership of the Group-wide 
Marketing community.

Patrick S. Lee, Chief Executive Ofﬁcer, Inchcape North Asia 
and China: Patrick is in charge of our operations in Hong 
Kong, Macau and Guam. In all three markets, Toyota has 
maintained the No.1 position for several years. He is also 
responsible for the Group’s operations in China.

Bertrand Mallet, Chief Development Ofﬁcer: Bertrand was 
appointed as Chief Development Ofﬁcer in June 2015. Prior to 
this, he was Chief Executive Ofﬁcer, Toyota Belgium and has 
previously held the positions of Managing Director of the 
Emerging Markets and the Group Strategy Director.

A GLOBAL TEAM  
OF EXPERTS

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inchcape.com 23

 
 
CHIEF EXECUTIVE’S REVIEW CONTINUED

Growth opportunities
But did I ﬁnd a company where nothing should be evolved? 
That would be an undesirable situation for any new CEO, as  
it would imply that there was no opportunity for improvement. 
Through listening to colleagues, OEM partners and end-
customers across the world, I did identify a number of areas  
in which there are clear opportunities to drive an even better 
performance, enabling us to grow our organisation and our 
proﬁts in the long term while remaining committed to strong 
ﬁnancial discipline.

As the global car industry rapidly evolves, the purchase 
behaviour and service-level expectations of consumers  
is clearly changing. We operate in a market place where 
disruptors are challenging industry incumbents and 
customers are taking more control by navigating a  
growing digital landscape. We must continue to develop  
our processes – and meet them consistently – to retain  
our position as the recognised industry leader in customer 
service in a connected, ‘omni-channel’ world.

Next, we have a very strong portfolio of brands; we need to 
build on our OEM partnerships to ensure that we thoroughly 
deserve to achieve the status of ‘partner of choice’ across all 
our relationships, and then to robustly defend that position. 
This is fundamental to our continued future success. At every 
level of Inchcape, the OEM relationship must be recognised 
for what it is – the foundation stone for everything we do and 
achieve. Our past work in building these relationships has 
been successful – now, it is my intention that we will focus  
on delivering even more value to every OEM partner, so  
that we become established as the ﬁrst port of call for  
every shared opportunity and challenge.

Third, our markets have strong long-term structural growth 
drivers, but the addressable market for Aftersales is set to  
grow even faster than the New car market.  Aftersales is  
a key defensive revenue stream for the Group and drives 
approximately half of the Group’s proﬁts. There is, therefore,  
a requirement to rebalance the focus on leveraging all  
our value drivers to maximise the potential of each of  
them across the mix. 

Fourth, we have to exploit the full advantage of our unique 
position in the market place to share even more expertise 
and best practice across our organisation, leveraging our 
global scale to improve collaborative working practices  
and generate cost savings through shared services and 
global purchasing. 

Fifth, the automotive Distribution and Retail markets are  
highly fragmented; we should apply a disciplined use of 
capital to fuel further growth through selective participation  
in market consolidation.

24

Inchcape Annual Report and Accounts 2015

Enabling positive change
Inchcape has solid foundations, but the environment in which 
we operate is clearly changing. To achieve our ambition, we 
will need to do some things somewhat differently. Our previous 
strategy has served us well for many years, enabling us to 
capitalise on our global leadership position. However, it is 
apparent that change is needed to build upon the great 
work of the past to maximise our performance in the future.

So, working closely with the Group Executive Team, together 
we have created an evolved strategy and vision for Inchcape: 
one that will enable us to take an even stronger leadership 
role in our industry, generating cash to invest in growth in 
markets across the world. And one that will allow us to lead 
the industry, not just in terms of scale but also of ambition, 
vision and quality of service.

In devising our strategy, we have set ﬁve objectives (see page 
25) to guide our business. These have the full endorsement  
of the Board and exist as a set of calculated and targeted 
statements that support and enable positive change on  
the ground, every day and in every part of the organisation. 

Drawn and reﬁned from the identiﬁed opportunities and 
challenges we face, they are based on real factors that  
are already impacting our business and will continue to do  
so for several years. These are the trends that are having the 
greatest effect on our markets worldwide; using them as the 
foundation of our new strategy ensures that we will constantly 
meet market needs. That is why they form the core framework 
of the actions we will take to accelerate our growth and 
business performance. 

Single-minded focus
This is a straightforward approach to getting done the  
things that matter, which revolves around teamwork and 
accountability, a shared cultural mindset, a single-minded 
focus on our key priorities and constant monitoring of 
progress and performance. 

We are organising the change programme as a series of  
ﬁve parallel workstreams. Addressing the strategic objectives 
one-by-one, each workstream comprises a set of sequential 
phases which will be championed by members of the  
Group Executive Committee, delivered locally, supported  
with centralised resources and set within a clear governance 
framework that includes regular updates to both the Group 
Executive Committee and the Board.

The core priorities within each workstream will evolve further 
over the life of the change programme, and I will report 
accordingly in future communications.

A single-minded focus  
on our key priorities and 
constant monitoring of 
progress and performance

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A unifying vision
So those are some of the practical measures behind the 
delivery of our new growth strategy. It is also important that  
we have a unifying company vision that gives strategic  
shape to the organisation, its mission and its purpose. 

I have suggested in this letter that Inchcape is now taking  
an important evolutionary step that will see it build on the 
successful delivery of its recent past in a way that is ﬁtting to 
the market environment of the future. This is a major step for 
any organisation, and it is not one that we are taking lightly. 

We wanted to devise a single, uniquely Inchcape theme to 
which we could all align and that would highlight our role,  
our function and our value in the eyes of our customers and 
OEM partners.

Above all, we wanted to elevate our OEM partners alongside 
the customer in terms of the importance ascribed to them  
at every level of our organisation. The relationship with our 
manufacturers has always been fundamental to Inchcape’s 
competitive advantage, but being the partner organisation  
to which they turn ﬁrst for support and collaboration has never 
been more important than it will be in the years to come. As I 
have already suggested, Inchcape’s twin focus on B2C and 
B2B business must not favour one over the other – they are 
both strategically critical to our performance.

As a result of such considerations, the new vision for  
Inchcape is: 

“ To be the world’s most  
trusted automotive  
Distributor and Retailer”.

Lead in  
customer 
experience

Become the 
OEM’s partner  
of choice

Leverage  
our global  
scale

TO BE  
THE WORLD’S 
MOST TRUSTED 
AUTOMOTIVE 
DISTRIBUTOR & 
RETAILER

Invest to 
accelerate 
growth

Deliver full 
potential on  
all our revenue 
streams

Our ﬁve strategic objectives 
1.  Lead in customer experience

We will invest to maintain our position as leader  
in customer service innovation in automotive 
Distribution and Retail, with digital a key priority. 
Through a programme of global research, we will 
build on our insights into the customer journey in an 
omni-channel world and create stand-out customer 
experiences combining data-driven personalisation 
with a human touch.

2.   Become the OEM’s partner of choice
We will build and strengthen our working 
relationships with our OEM partners by investing  
time in understanding their needs, seeking greater 
opportunities for collaboration and sharing our 
insight into customer and industry trends with the 
aim of becoming a consistent strategic business 
partner at both global and local levels.

3.   Deliver full potential from all our 

revenue streams
We will increase our management focus on our 
Used vehicle and Aftersales activities at all levels of 
the organisation, enhancing their perceived status 
within the business and deepening further reporting 
and analysis. We will more actively seek to develop 
business opportunities, sharpening our emphasis on 
building our brand and USPs in these areas to match 
our proﬁle in New vehicle sales. 

4.  Leverage our global scale

We will allocate more resources to innovation, 
sharing and beneﬁting even more effectively  
from the proven ideas generated throughout the 
global organisation. We will sharpen further our 
business processes, management skills, creativity 
and strategic planning across the Group, focusing  
on procurement, talent management and shared 
services to boost performance and reduce costs. 
And we will leverage our unique competitive 
advantage to develop and grow our proposition  
in new, emerging and developed markets.

5.  Invest to accelerate growth

We have increased our business development 
resources to ensure we have the management 
capabilities to participate in industry consolidation. 
Furthermore, we will involve the CEOs of our  
market-speciﬁc operations, and leverage their 
knowledge and insight more directly in delivering 
our growth agenda.

inchcape.com 25

 
 
CHIEF EXECUTIVE’S REVIEW CONTINUED

Trust. A priceless commodity
Becoming the OEM partner of choice means being the most 
trusted partner. Being the leader in automotive customer 
service is also based on a fundamental foundation of trust. 
And it is by warranting the trust of our investors that we will 
become an ever more highly valued company.

Clearly, gaining and maintaining trust through outstanding 
performance at all levels of the business is a key source of 
added value for the Group – the result of the desirable 
behaviours throughout the organisation that will drive success 
in the global markets of the future. Our new vision naturally 
guides the behaviours we seek by holding every initiative, 
every action and every individual in the organisation 
accountable to a very simple idea. It highlights our stated aim 
as a Company without having to explain it to our audiences.

The idea behind the development of our new strategy and 
vision is a simple one – to take Inchcape to the next level of  
its evolution in a shape that is consistent and in tune with  
the direction being taken by the global automotive industry.  
It is too early to state explicitly and precisely what shape this 
organisation will take, but it is possible today to highlight a 
number of its most valuable attributes.

Valuable attributes
First, Inchcape will be a growth business that generates cash 
but also builds on its strong foundations to invest in its future. 
We already occupy a unique position in the industry in terms 
of our scale, global reach and long-standing OEM partner 
relationships. By investing in growth and consolidation, we will 
strengthen further the advantage of being positioned at one 
of the most crucial parts of our $1.7 trillion industry – that 
critical point linking the manufacturer with the customer. 

Next, Inchcape will be a company operating in global 
markets that increasingly acts as a single, uniﬁed global team, 
sharing knowledge and expertise across every country and 
site. Inchcape will also have a genuinely global operating 
model in which we all leverage the same centralised, 
state-of-the-art systems and processes to maximise our 
operational efﬁciency and effectiveness. 

Third, Inchcape will be a Company in which we fully 
embrace the challenges faced by our OEM partners, 
to become their partner of choice for collaboration,  
problem-solving and development into the future. In this way, 
we will provide them not only with a matchless customer 
interface but also with a source of innovation and 
differentiation that enables them to deliver more of  
their aspirations, more efﬁciently and cost-effectively. 

Inchcape will be a company that has the investment, 
the skill and the conﬁdence to extract full potential from 
all our value drivers.

A path of improvement
So, I am fully conﬁdent that the way ahead for Inchcape as 
we steer our new strategic direction over the next ﬁve years  
is on a well-charted path of improvement and growth.

As I have stated, I believe that we have an opportunity to 
evolve as we build on our strong foundations and track 
record of performance. I believe I have outlined that need  
for change and how we are responding to it in this report. I 
am conﬁdent that the shared spirit, commitment and talents 
of our united team will continue to enable us to deliver and 
win across our global market place, leveraging the unique 
position that we occupy and realising the full potential of  
the Inchcape Group, a Company that will be driven by trust.

The global economy faces greater uncertainty looking 
forward, but Inchcape is well positioned – with supportive 
drivers at the local level across our diversiﬁed portfolio of 
markets and revenue streams. We expect to deliver a solid 
constant currency performance in 2016.

STEFAN BOMHARD

Group Chief Executive

26

Inchcape Annual Report and Accounts 2015

I

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KEY PERFORMANCE INDICATORS

KEY PERFORMANCE INDICATORS

The Inchcape plc Board of Directors and the Group Executive Committee monitor the Group’s progress against its strategic  
objectives and the ﬁnancial performance of the Group’s operations on a regular basis. Performance is assessed against the  
strategy, budgets and forecasts. We also measure the quality of revenues through the mix of revenue streams, and the ﬂow  
through of value from sales revenue to trading proﬁt.

Sales
£6.8bn

2014: £6.7bn

£
5
.
9
b
n

£
5
.
8
b
n

£
6
.
1
b
n

£
6
.
7
b
n

£
6
.
8
b
n

£
6
.
5
b
n

Trading proﬁt
£354.7m

2014: £344.6m

Trading margin
5.2%

2014: 5.1%

Proﬁt before tax
£312.1m

2014: £303.2

£
3
0
5
.
8
m

£
2
8
0
.
1
m

£
2
6
1
.
8
m

£
2
4
8
.
1
m

£
3
5
4
.
7
m

£
3
4
4
.
6
m

5
.
1
%

5
.
2
%

4
.
5
%

4
.
6
%

4
.
7
%

4
.
2
%

£
3
1
2
.
1
m

£
3
0
3
.
2
m

£
2
7
4
.
6
m

£
2
4
7
.
0
m

£
2
2
7
.
7
m

£
2
1
4
.
0
m

10

11

12

13

14

15

10

11

12

13

14

15

10

11

12

13

14

15

10

11

12

13

14

15

Deﬁnition

Deﬁnition

Deﬁnition

Consideration receivable from 
the sale of goods and services. It 
is stated net of rebates and any 
discounts, and excludes sales 
related taxes.

Achievements

Group sales were up 2.0%  
on last year driven by strong top 
line performance in Australia, the 
UK, North Asia and South Asia. 

Operating proﬁt excluding the 
impact of exceptional items  
and unallocated central costs.

Achievements

A continued focus on cost 
control and accretive margin 
growth has meant that trading 
proﬁt has grown by 2.9% 
year-on-year. 

Calculated by dividing trading 
proﬁt by sales.

Achievements

The Group’s trading margin grew 
to 5.2% (+10bps).

Deﬁnition

Represents the proﬁt made  
after operating and interest 
expense excluding the impact  
of exceptional items and before  
tax is charged.

Achievements

Proﬁt before tax and exceptional 
items increased by 2.9%, to a 
record £312.1m. 

Working capital
£24.4m

2014: £(16.2)m

Cash from operations
£328.4m

2014: £405.8m

Like for like sales
9.0%

2014: 10.1%

£
4
5
.
8
m

£
1
2
.
2
m

£
2
5
.
9
m

£
1
8
.
4
m

£
2
4
.
4
m

£
(
1
6
.
2
)
m

£
2
7
4
.
3
m

£
2
4
4
.
7
m

£
2
4
9
.
2
m

£
2
2
7
.
0
m

£
4
0
5
.
8
m

£
3
2
8
.
4
m

1
0
.
1
%

9
.
0
%

6
.
0
%

3
.
0
%

3
.
1
%

(
1
.
7
)
%

10

11

12

13

14

15

10

11

12

13

14

15

10

11

12

13

14

15

Deﬁnition

Deﬁnition

Deﬁnition

Inventory, receivables, payables, 
and supplier related credit.

Achievements

Working capital continued to  
be tightly managed throughout 
the year and we ended the year 
with £24.4m of working capital, 
following the normalisation of  
last year’s unusually low position 
in Russia.

Operating proﬁt adjusted  
for depreciation, amortisation 
and other non-cash items  
plus the change in working 
capital, provisions and  
pension contributions.

Achievements

The Group has generated an 
operating cash ﬂow of £328.4m.

Excludes the impact of acquisitions from the date of acquisition until 
the 13th month of ownership and businesses that are sold or closed. It 
further removes the impact of retail centres that are relocated from the 
date of opening until the 13th month of trading in the new location. 
These numbers are presented in constant currency.

Achievements

Like for like sales increased by 9.0%.

inchcape.com 27

 
 
OPERATING  
REVIEW

The Group delivered a good performance,  
with underlying operating proﬁt growth of 8%

Our results are stated at actual rates of exchange. However, 
to enhance comparability we also present year-on-year 
changes in sales and trading proﬁt in constant currency, 
thereby isolating the impact of exchange. Unless otherwise 
stated, changes in sales and trading proﬁt in the operating 
review are at constant currency. The 2016 outlook 
commentary is also referenced at constant currency.

JOHN MCCONNELL

Chief Financial Ofﬁcer

Working capital continues to be tightly managed 
and we ended the year with £24.4m of working 
capital following the normalisation of last year’s 
unusually low position in Russia. 

We continue to make selective capital 
investments and during the year have invested  
in new facilities in Singapore as well as continuing 
to develop our facilities in the UK, Australia and 
Emerging Markets. Net capital expenditure of 
£53.6m is broadly in line with last year excluding 
the proceeds from the property disposal in 
Singapore in 2014.

Continued strong cash conversion drove net cash 
at the end of the year of £166.4m, 20.8% lower 
than last year due to the increases in working 
capital and capital expenditure noted above.

We have taken further steps to de-risk our balance 
sheet, entering into a transaction with Aviva to 
insure the liabilities of our TKM pension scheme 
(note 5 on page 106).

During 2015, we completed the second £50m  
of our 2014 £100m share buy back scheme at  
an average price of 776p and the ﬁrst £41.4m  
of our 2015 scheme at 755p.

Sales

£6.8bn

(2014: £6.7bn) 

Trading proﬁt

£354.7m

(2014: £344.6m) 

Working capital

£24.4m

(2014: £(16.2)m) 

Net capital 
expenditure

£53.6m

(2014: £35.0m) 

We continue to beneﬁt from our broad 
geographic footprint and the depth and  
breadth of Retail and Distribution relationships 
with the world’s leading premium and luxury 
automotive brands. The Group has delivered 
robust sales and underlying operating results 
which have been adversely impacted by 
exchange rate movements.

Group Sales of £6.8bn are up 7.8% year-on-year 
with strong top line growth in Australia, the UK, 
North Asia and South Asia offsetting softer market 
conditions in Europe and Russia. The Group 
delivered a trading proﬁt of £354.7m, up 10.7%  
on last year on an underlying basis (excluding  
the proﬁt on disposal of property in Singapore  
in 2014). Trading margin has improved by 10bps  
to 5.2% on an underlying basis driven by the 
strong performances of our Australasian and 
Emerging Markets businesses. 

Despite Russia delivering a trading performance  
in line with our expectations, the further 
weakening in the macroeconomic outlook  
has led us to include a £49.5m non-cash 
exceptional impairment to write off the full  
value of goodwill in our Russian business  
(note 11 on pages 115 to 116).

28

Inchcape Annual Report and Accounts 2015

Distribution
Our Distribution business delivered another strong 
year, growing revenue year-on-year by 10.9% to 
£2.8bn with underlying trading proﬁt growth of 
15.5%, excluding the proﬁt on disposal of property 
in Singapore in 2014.

We delivered a strong performance in our 
Australasian segment with revenue growth of 
13.5% and trading margin expansion of 30bps 
year-on-year, driven by Subaru market share  
gains and favourable foreign exchange rates.

In South Asia, revenue growth of 14.4% and 
underlying trading proﬁt growth of 26.6% were 
driven by the increased availability of Certiﬁcates 
of Entitlement (COEs) fuelling growth of the New 
car market.

In North Asia, we delivered revenue growth of 
15.1% and trading proﬁt growth of 10.7%, driven  
by another year of market share gains in Hong 
Kong, where we retained the Toyota Triple Crown 
award (for leadership in private cars, commercial 
vehicles and the overall vehicle market) for the 
24th consecutive year.

Emerging Markets grew revenue by 9.0% and 
trading proﬁt by 22.4%, driven by a very strong 
performance in Africa as we capitalised on 
investments in our facilities to drive both vehicle 
and Aftersales growth.

Our European segment was broadly ﬂat to last 
year as trading proﬁt growth in Greece and 
Finland was offset by a decline in Belgium. 

Retail
We increased revenue in our Retail operations  
by 5.8%, driven by double digit growth in the UK 
and a strong year in Australia. The trading proﬁt 
decline of 3.6% was driven by the continued 
margin pressure on the Used car segment  
as attractive ﬁnancing options on New cars 
created pricing pressure on ‘nearly new’ cars.

The 6.3% increase in total UK registrations to  
a record 2.63m units represented the fourth 
consecutive year of growth in the UK market.  
Our business delivered revenue growth of 10.0% 
and gained 10bps of share across the brands 
that Inchcape represents in the market. Trading 
proﬁt declined by 5.1%, driven by continued 
margin pressure on New and Used cars as  
well as increased facility and IT (iPower) 
amortisation costs. 

Australia revenue growth of 5.8% and trading  
proﬁt growth of 5.0% were driven by the successful 
launch of the new Liberty and Outback in the 
Subaru business.

Revenues in our European segment declined by 
19.7%, due to a decline in market share in Belgium 
and the closure of our retail operations in Finland.

Our Emerging Markets revenues declined by  
4.8%, driven, as expected, by the revenue decline 
in Russia of 13.5%. Excluding Russia, trading proﬁt 
in the segment increased by 40.2%. 

Regional analysis
The Group reports its regional analysis in line  
with IFRS 8 ‘Operating Segments’.

This standard requires operating segments to be 
identiﬁed on the basis of internal reports about 
components of the Group that are regularly 
reviewed by the chief operating decision maker 
in order to assess their performance and to 
allocate resources to the segments. These 
operating segments are then aggregated  
into reporting segments to combine those  
with similar characteristics.

Distribution

Australasia

Europe

North Asia

South Asia

United Kingdom

Emerging Markets

Retail

Australasia

Europe

United Kingdom

Emerging Markets

Included within the Emerging Markets segment 
are Russia, China, South America, Africa, the 
Balkans, the Baltics and Poland on the basis that 
these markets have started to grow but have yet 
to reach a mature stage of development and 
accordingly are in, or are expected to return to, 
the growth phase of the development cycle.

Australasia
Another year of double digit proﬁt growth 

Europe
Market recovery in Greece offset by weak consumer  
demand in Belgium

North Asia
Market share gains drive another record year

South Asia
Acceleration of underlying momentum

United Kingdom
Well positioned in a growing market

Emerging Markets
Strong performance drives proﬁtable growth 

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inchcape.com 29

 
 
OPERATING REVIEW CONTINUED

PERFORMANCE  
OVERVIEW

Performance Indicators – Results

£m 
2015

£m 
2014

% change

 6,836.3 

 6,702.7 

 354.7 

5.2%

 344.6 

5.1%

 6,679.5 

 6,478.4 

3.1%

 312.1 

24.4 

 328.4 

 166.4 

2.9%

 303.2 

(16.2)

 405.8 

 210.2 

2.0%

2.9%

0.1ppt

3.1%

0.2ppt

2.9%

n/a

(19.1%)

(20.8%)

% change in 
constant 
currency

7.8%

5.0%

(0.1ppt)

9.0%

4.2%

£m 
2015

£m 
2014

% change

% change in 
constant 
currency

 4,061.9 

 2,774.4 

 4,118.6 

 2,584.1 

 3,919.8 

 2,759.7 

 3,951.3 

 2,527.1 

 77.8 

 276.9 

 83.8 

 260.8 

(1.4%)

7.4%

(0.8%)

9.2%

(7.2%)

6.2%

5.8%

10.9%

6.4%

12.9%

(3.6%)

7.7%

Trading proﬁt 
£m 
2015

Exceptional 
items 
£m 
2015

Operating proﬁt 
£m 
2015

Trading proﬁt 
£m 
2014

Exceptional 
items 
£m 
2014

Operating proﬁt 
£m 
2014

 90.6 

 17.9 

 80.0 

 51.9 

 63.4 

 50.9 

 354.7 

 – 

 – 

 – 

 – 

 – 

(49.5)

(49.5)

–

 – 

 90.6 

 17.9 

 80.0 

 51.9 

 63.4 

 1.4 

 305.2 

(30.0)

 275.2 

 89.3 

 20.8 

 66.9 

 58.7 

 65.2 

 43.7 

 344.6 

–

–

–

–

–

(47.4)

(47.4)

–

–

 89.3 

 20.8 

 66.9 

 58.7 

 65.2 

(3.7)

 297.2 

(26.2)

 271.0 

Sales

Trading proﬁt

Trading margin %

Like for like sales

Like for like sales growth %

Proﬁt before tax before exceptional items

Working capital

Cash generated from operations

Net cash

Business Analysis

Sales

Retail

Distribution

Like for like sales

Retail

Distribution

Trading proﬁt

Retail

Distribution

Regional Analysis

Australasia

Europe

North Asia

South Asia*

United Kingdom

Emerging Markets

Trading proﬁt

Central costs

Operating proﬁt

* Trading proﬁt in 2014 includes a property proﬁt of £17.3m.

30

Inchcape Annual Report and Accounts 2015

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AUSTRALASIA

Another record year with 
double digit proﬁt growth

GEORGE ASHFORD

CEO,  
Inchcape Australasia

Key ﬁnancial highlights

Sales

Retail

Distribution

Like for like sales

Retail

Distribution

Trading proﬁt

Retail

Distribution

Trading margin %

Retail

Distribution

Sales

£1.2bn

(2014: £1.2bn) 

Trading proﬁt

£90.6m

(2014: £89.3m)

£m 
2015

£m 
2014

 1,219.9 

 1,243.4 

 642.2 

 577.7 

 676.7 

 566.7 

 1,196.3 

 1,182.3 

 618.6 

 577.7 

 90.6 

 23.6 

 67.0 

7.4%

3.7%

 615.6 

 566.7 

 89.3 

 25.0 

 64.3 

7.2%

3.7%

% change in 
constant 
currency

9.3%

5.8%

13.5%

12.7%

12.0%

13.5%

13.1%

5.0%

16.2%

0.2ppt

–

% change

(1.9%)

(5.1%)

1.9%

1.2%

0.5%

1.9%

1.5%

(5.6%)

4.2%

0.2ppt

–

11.6%

11.3%

0.3ppt

0.3ppt

Market
The Australian car market grew by 3.8% in  
2015 driven by the continued strength of the  
SUV segment. The car market in New Zealand 
grew by 7.8%.

Business model
We are the Distributor for Subaru in both Australia 
and New Zealand. In addition, we have multi-
franchise Retail operations based in Sydney, 
Melbourne and Brisbane. Our Australian  
operation holds franchises for Subaru, Volkswagen, 
Mitsubishi, Isuzu and Kia as well as a portfolio of 
the world’s leading luxury and premium brands 
including BMW, Jaguar, Land Rover and Honda 
and the highly aspirational, super-luxury brands 
Rolls-Royce, Bentley, Aston Martin and McLaren. 
During the year, we continued to rationalise our 
Retail footprint, disposing of the Harley Davidson, 
Peugeot and Volvo franchises as well as the 
bespoke business (Aston Martin, Rolls-Royce and 
McLaren) in Melbourne. At the end of 2015, we 
owned 32 retail centres and managed a network 
of 110 independently owned Subaru centres 
throughout Australasia.

Supporting these operations, our logistics business 
AutoNexus is responsible for managing vehicle 
and parts inventory, distribution and vehicle 
preparation on behalf of our Subaru Distribution 
business, and our Retail business, as well as other 
independent dealers.

Operating performance
Our Australasian segment delivered a robust  
top line performance with sales up 9.3%, with  
a record trading proﬁt of £90.6m.

Trading proﬁt growth of 13.1% beneﬁted  
from favourable exchange rates between  
the Australian Dollar and Japanese Yen across  
the Subaru range and the successful launch of 
the new Subaru Outback and Liberty models.

Our Subaru business is winning in the growth 
segments of the market with a 20bps market 
share gain driven by the launch of the new 
Outback and Liberty models and the refreshed 
XV, Forester and WRX. Overall, our Distribution 
business drove revenue growth of 13.5% with 
30bps of trading margin expansion to 11.6%.

Our Retail segment delivered robust revenue 
growth of 5.8% supported by launches of  
Jaguar XE, BMW 1 Series and Land  
Rover Discovery Sport.

Outlook for 2016
We expect some modest underlying growth  
in the market due to structural population growth, 
premiumisation of demand and a replacement 
cycle supported by a relatively old Car Parc.

We will continue to leverage the pricing power  
of the premium positioning of the Subaru range, 
but expect some pressure on margins given the 
recent weakness of the Australian Dollar against 
the Japanese Yen.

We expect to deliver a resilient performance  
in Australasia in 2016. 

inchcape.com 31

 
 
Operating performance
Our Greek business delivered a strong 
performance, growing 30bps of market share  
to 12.3% to further consolidate overall market 
leadership and retain the Toyota Triple Crown  
for leadership in private cars, commercial  
vehicles and the overall vehicle market.

In Belgium, our market share declined by 60bps, 
as market growth was driven by the low-margin 
ﬂeet market in which we are relatively under-
represented. Aris Aravanis has now assumed 
responsibility for Belgium in addition to Greece 
and the Balkans.

Overall, revenue and trading proﬁt declined  
by 4.4% in Europe, with growth in Greece and 
Finland offset by the decline in Belgium.

Outlook for 2016
We expect the Greek market to continue to 
recover following the six years of decline to  
2013, with our Toyota business expected to deliver 
proﬁtable growth in both Sales and Aftersales. The 
Belgian market is expected to remain relatively ﬂat.

We expect our European segment to deliver  
a resilient performance in 2016.

OPERATING REVIEW CONTINUED

EUROPE

Market recovery in Greece 
offset by weak consumer 
demand in Belgium

ARIS ARAVANIS

CEO,  
Continental Europe

Key ﬁnancial highlights

Sales

Retail

Distribution

Like for like sales

Retail

Distribution

Trading proﬁt

Retail

Distribution

Trading margin %

Retail

Distribution

Sales

£541.1m

(2014: £629.9m) 

Trading proﬁt

£17.9m

(2014: £20.8m)

£m 
2015

 541.1 

 88.0 

 453.1 

 541.1 

 88.0 

 453.1 

 17.9 

–

 17.9 

3.3%

–

4.0%

£m 
2014

 629.9 

 122.1 

 507.8 

 624.0 

 116.2 

 507.8 

 20.8 

 0.3 

 20.5 

3.3%

0.2%

4.0%

% change in 
constant 
currency

(4.4%)

(19.7%)

(0.7%)

(3.5%)

(15.7%)

(0.7%)

(4.4%)

% change

(14.1%)

(27.9%)

(10.8%)

(13.3%)

(24.3%)

(10.8%)

(13.9%)

(100.0%)

(108.2%)

(12.7%)

(2.8%)

–

– 

(0.2ppt)

(0.3ppt)

–

–

Market
The Greek market continued to improve following 
the stabilisation of the political situation to ﬁnish 
the year up 6.8%. The Belgian market is up 3.8%  
in aggregate, driven by 9.4% growth in the ﬂeet 
market offsetting a 1.8% decline in private sales.

Business model
In Greece, we are the Distributor for Toyota and 
Lexus, owning ﬁve retail centres and overseeing  
a further 42 which are independently owned.  
In Belgium and Luxembourg, we distribute  
Toyota and Lexus and own 11 retail centres  
with a network of 93 retail centres operated by 
independent third party retailers, and 35 repair 
outlets. In Luxembourg, we also operate a retail 
centre for Jaguar. In Finland, we are the Distributor 
for Jaguar, Land Rover and Mazda and we 
manage a network of 46 independent retailers.

32

Inchcape Annual Report and Accounts 2015

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NORTH ASIA 

Market share gains drive 
another record year

Operating performance
We have delivered another year of strong 
performance across the region.

PATRICK S LEE

CEO,  
Inchcape North Asia and China

Key ﬁnancial highlights

Sales

Distribution

Like for like sales

Distribution

Trading proﬁt

Distribution

Trading margin %

Distribution

£m 
2015

 746.2 

 746.2 

 735.9 

 735.9 

 80.0 

 80.0 

10.7%

10.7%

£m 
2014

 600.3 

 600.3 

 592.5 

 592.5 

 66.9 

 66.9 

11.1%

11.1%

% change in 
constant 
currency

% change

24.3%

24.3%

24.2%

24.2%

19.6%

19.6%

15.1%

15.1%

15.0%

15.0%

10.7%

10.7%

(0.4ppt)

(0.4ppt)

(0.4ppt)

(0.4ppt)

Sales

£746.2m

(2014: £600.3m) 

Trading proﬁt

£80.0m

(2014: £66.9m)

Market
Hong Kong is the main market in this segment. The 
Hong Kong market grew strongly in 2015, driven by 
the commercial vehicle segment where owners 
replaced vehicles ahead of the end of the ﬁrst 
phase of the government’s scrappage scheme 
for pre-Euro IV vehicles. Market growth for the full 
year was 6.1%, however consumer and corporate 
conﬁdence weakened in the second half, with 
growth moderating to 1.1%.

In Hong Kong, we strengthened our number one 
position with a market share of 33.3%, up 280bps 
driven by the growth of the commercial vehicle 
segment in which we are market leader. We drove 
strong growth in passenger cars and beneﬁted 
from the successful launch of a number of new 
models including the Toyota Spade and Sienta. 
Crown Motors won the coveted Toyota Triple 
Crown award for market leadership for the  
24th consecutive year.

Overall, we delivered revenue growth of 15.1% 
across North Asia with strong growth across our 
vehicle and Aftersales segments. Trading margin 
declined by 40bps, driven by the increased 
contribution of vehicle sales to the overall results.

We delivered double digit trading proﬁt growth 
with a record £80.0m in trading proﬁt in North Asia.

Outlook for 2016
We expect the softening of consumer and 
corporate conﬁdence to continue in Hong Kong 
and expect the vehicle market to be lower in 2016. 
The growth, in recent years, in the Hong Kong 
passenger and commercial vehicle markets  
will support our defensive Service and Parts 
revenue streams.

We expect to deliver a resilient performance  
in 2016 in North Asia.

Business model
In Hong Kong and Macau, we are the exclusive 
Distributor for Toyota, Lexus, Land Rover, Jaguar, 
Ford, Daihatsu and Hino Trucks. We also own  
and operate all 12 retail centres for these  
brand partners in this market. During the year  
we opened a major new retail centre for Hino 
Trucks in Hong Kong, to further build our market 
share and facilitate Aftersales opportunities. 

During 2015, we entered into a relationship with 
the Chinese company Shanghai Automotive 
Industry Corporation (SAIC), to expand our offer  
in commercial vehicles in Hong Kong and Macau, 
complementing our Toyota and Ford offerings with 
the Maxus brand. 

In Guam, we are the exclusive Distributor and 
Retailer for Toyota, Lexus and Chevrolet, owning  
all three retail centres. In Saipan, we are the 
Distributor and Retailer for Toyota with one  
retail centre. 

inchcape.com 33

 
 
OPERATING REVIEW CONTINUED

SOUTH ASIA

Acceleration of underlying 
momentum 

KOH CHING HONG

CEO,  
Inchcape South Asia

Key ﬁnancial highlights

Sales

Distribution

Like for like sales

Distribution

Trading proﬁt

Distribution

Trading margin %

Distribution

Sales

£500.0m

(2014: £439.3m) 

Trading proﬁt

£51.9m

(2014: £58.7m)

£m 
2015

 500.0 

 500.0 

 497.6 

 497.6 

 51.9 

 51.9 

10.4%

10.4%

£m 
2014

 439.3 

 439.3 

 390.1 

 390.1 

 58.7 

 58.7 

13.4%

13.4%

% change in 
constant 
currency

14.4%

14.4%

28.2%

28.2%

(11.2%)

(11.2%)

(3.0ppt)

(3.0ppt)

% change

13.8%

13.8%

27.6%

27.6%

(11.6%)

(11.6%)

(3.0ppt)

(3.0ppt)

Market
Our largest market in this segment is Singapore 
where, as expected, the market grew strongly  
by 65.8% as growing de-registrations drove an 
increase in the quota of available Certiﬁcates  
of Entitlement (COEs) and the government 
scrappage scheme helped to boost commercial 
vehicle replacement. In Brunei, the market 
declined by 19.3% following the fall in the oil  
price and the government’s restriction on 
consumer credit.

Business model
In Singapore we are the Distributor for Toyota, 
Lexus, Hino Trucks and Suzuki. We have 
represented Toyota in Singapore since 1967 and 
have held the Suzuki distribution franchise since 
1977. We own and operate all ﬁve retail centres  
in the market. During the year we opened a  
new 60,000 square foot Body and Paint facility 
with the servicing capacity of up to 600 vehicles 
per month.

In Brunei we are the Distributor for both Toyota  
and Lexus, owning and operating all four retail 
centres there. 

Operating performance
We delivered solid revenue growth of 14.4%  
with the growth rate accelerating to 21.2% in  
the second half of the year. 

We delivered 28.2% like for like revenue growth  
in South Asia, adjusting for the amendment in 
reporting of Used car sales as outlined in our 
interim statement. We have amended the way  
we report Used vehicle sales in Singapore to  
better reﬂect the substance of the associated 
transaction. Historically we recorded the revenue 
for the total Used car transaction value whereas 
we now record the margin we make on the sale 
to Used car traders as the revenue. We have 
adjusted like for like sales in 2014, a reduction  
of £45m, to enable comparability. 

Regional revenue growth was impacted by the 
slowdown in Brunei, where despite the successful 
launch of the Toyota Wigo, and winning the Toyota 
Triple Crown for the second year in a row, our 
Brunei revenue declined by 20.3%.

Improved trading margins in the second half of  
the year of 11.1% drove full year trading margin of 
10.4%. This represents an underlying improvement 
on 2014 with margin improvements in each 
revenue stream offsetting the increased 
contribution of vehicle sales to the overall business.

Underlying trading proﬁt growth of 26.6% 
(excluding the £17.3m property proﬁt in Singapore 
in 2014) reﬂects a much stronger second half 
2015 growth rate of 47.5%, compared to the ﬁrst 
half of 2015 at 3.0%.

Outlook for 2016
Strong market growth in Singapore will be 
underpinned by the continued increase in the 
availability of COEs as the level of de-registration 
continues to grow. Given our leadership position, 
and with an even stronger product line up, we  
are well positioned to participate strongly in this 
growing market.

We expect to deliver a strong performance in 
South Asia in 2016.

34

Inchcape Annual Report and Accounts 2015

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UK 

Well positioned  
in a growing market

LOUIS FALLENSTEIN

CEO,  
Inchcape UK

Key ﬁnancial highlights

Sales

Retail

Distribution

Like for like sales

Retail

Distribution

Trading proﬁt

Retail

Distribution

Trading margin %

Retail

Distribution

Sales

£2.7bn

(2014: £2.5bn) 

Trading proﬁt

£63.4m

(2014: £65.2m)

£m 
2015

 2,725.2 

 2,662.4 

 62.8 

 2,609.4 

 2,546.6 

 62.8 

 63.4 

 52.0 

 11.4 

2.3%

2.0%

£m 
2014

 2,472.8 

 2,421.4 

 51.4 

 2,383.3 

 2,331.9 

 51.4 

 65.2 

 54.8 

 10.4 

2.6%

2.3%

18.2%

20.2%

% change in 
constant 
currency

% change

10.2%

10.0%

22.2%

9.5%

9.2%

22.2%

(2.8%)

(5.1%)

9.6%

10.2%

10.0%

22.2%

9.5%

9.2%

22.2%

(2.8%)

(5.1%)

9.6%

(0.3ppt)

(0.3ppt)

(2.0ppt)

(0.3ppt)

(0.3ppt)

(2.0ppt)

Market
For the fourth consecutive year the UK market 
grew, up by 6.3% in 2015 to a market record of 
2.63m vehicles. This has been driven by good 
consumer conﬁdence and the availability of 
attractive ﬁnancing offers leading to a 
continuation of the replacement cycle. Growth 
was driven by both the retail market, increasing 
2.5%, and the ﬂeet market that grew by 11.8%.

Business model
We have scale operations in the core regions  
of the South East, Midlands, North and North  
East of England with a portfolio of 110 retail 
centres focused on premium brands.

We aim to create signiﬁcant differentiation by 
delivering a superior level of customer service 
through our bespoke operating processes to  
drive growth in vehicle sales and ﬁnance 
products, and Aftersales retention. The Distribution 
element of our results is comprised of our ﬂeet 
management and leasing business, Inchcape 
Fleet Solutions (IFS), which offers services to 
corporate and government customers. With over 
50 years’ experience in the automotive industry,  
IFS has won a number of industry awards for its 
unrivalled level of customer service. 

Operating performance
We increased our market share and delivered 
strong revenue growth of 10.2% driven by the 
successful launch of new models, including the 
Jaguar XE and Land Rover Discovery Sport, as  
well as a number of face-lifted models across the 
broad range of OEM partners, including the Audi 
A4 and Q7, BMW 3 and 7 Series, MINI Clubman, 
Jaguar XF, Lexus RX, Mercedes-Benz GLC, Toyota 
Auris and VW Touran. 

Revenue growth slowed slightly in the second  
half of 2015 with limited impact on VW sales  
as a result of the investigation into emissions 
testing irregularities. 

Aftersales growth was strongly fuelled by the 
increasing Car Parc and the investments that we 
have made in facilities and capabilities both in 
retail centres and our customer contact centres.

We delivered a trading proﬁt of £63.4m, a decline 
of 2.8% year-on-year as trading margin in our 
Retail business declined by 30bps in 2015. This 
reduction in trading margin was driven by the 
increased contribution of Vehicle sales, lower  
Used vehicle margins and increased facility  
and IT amortisation costs.

IFS delivered a strong performance for the year 
with trading proﬁt growth of 9.6% to £11.4m 
following a record performance in 2014.

Outlook for 2016
We expect the robust UK economy, coupled with 
factors unique to the automotive market, such as 
PCP ﬁnancing, to support further industry growth 
in 2016 although to a more moderate level. Our 
Aftersales operations will continue to beneﬁt from 
the growth in the 1-5 year Car Parc. 

The momentum in the UK market coupled  
with our focus on superior customer service  
lead us to expect to deliver a solid performance  
in the UK in 2016.

inchcape.com 35

 
 
OPERATING REVIEW CONTINUED

EMERGING MARKETS

Strong performance drives 
proﬁtable growth

RUSLAN KINEBAS

CEO,  
Inchcape Emerging Markets

Key ﬁnancial highlights

Sales

Retail

Distribution

Like for like sales

Retail

Distribution

Trading proﬁt

Retail

Distribution

Trading margin %

Retail

Distribution

Sales

£1.1bn

(2014: £1.3bn) 

Trading proﬁt

£50.9m

(2014: £43.7m)

£m 
2015

£m 
2014

% change

% change in 
constant 
currency

 1,103.9 

 1,317.0 

 669.3 

 434.6 

 898.4 

 418.6 

 1,099.2 

 1,306.2 

 666.6 

 432.6 

 50.9 

 2.2 

 48.7 

4.6%

0.3%

11.2%

 887.6 

 418.6 

 43.7 

 3.7 

 40.0 

3.3%

0.4%

9.6%

(16.2%)

(25.5%)

3.8%

(15.8%)

(24.9%)

3.3%

16.5%

(40.5%)

21.8%

1.3ppt

(0.1ppt)

1.6ppt

0.2%

(4.8%)

9.0%

0.4%

(4.2%)

8.5%

18.3%

(32.6%)

22.4%

0.7ppt

(0.1ppt)

1.2ppt

Market
In our Distribution markets, Ethiopia remains a 
highly attractive, fast growing market with growing 
demand for New cars and Aftersales. South 
America has been challenging, with declining 
markets for premium cars in both Chile and Peru 
driven by the slowdown in the commodity cycle. 
In Eastern Europe, we beneﬁted from growing 
demand in the Balkans and Baltics. 

In our Retail markets, the Russian market has 
continued to contract, declining 35.7% year-on-
year driven by a weak rouble and a challenging 
economic environment. However, we beneﬁted 
from growing demand in Poland and demand  
for premium cars in our Chinese business 
remained robust.

Business model
In Ethiopia, we operate as the Distributor and 
Retailer for Toyota, Daihatsu, Komatsu and New 
Holland. In South America, we operate as the 
Distributor and Retailer for BMW in Peru and  
for BMW and Rolls-Royce in Chile.

In the Balkans, we are the Distributor for Toyota and 
Lexus, operating six retail centres. We operate as 
the Distributor and Retailer for Mazda, Jaguar and 
Land Rover across the Baltics and for Mitsubishi  
in Lithuania. Additionally, we retail BMW, Ford and 
MINI in Latvia and Ford and Hyundai in Lithuania. 
We operate a total of 23 centres across the region. 

36

Inchcape Annual Report and Accounts 2015

In Russia, we operate 21 retail centres in  
St. Petersburg and Moscow, representing nine 
brands, having exited loss-making Peugeot 
operations in St Petersburg. In Poland we own  
four retail centres for BMW and MINI. In China,  
we have four scale retail centres for Lexus, Jaguar 
and Land Rover in Shanghai and Shaoxing and 
one retail centre each in Nanchang for Porsche 
and Jiujiang for Mercedes.

Operating performance
Overall revenue for the region was broadly ﬂat  
to last year as a 13.5% decline in Russia offset 
growth across the rest of the portfolio.

Our business in Africa drove particularly strong 
growth both in New car sales and Aftersales  
as we opened new facilities to capitalise on  
the continued underlying economic growth.

In South America, we continue to drive  
share gains in a declining New car market  
and to develop and grow the proﬁtable  
Aftersales business. 

Market growth in the Balkans enabled us to  
drive a strong trading proﬁt.

With growth in market share and improved vehicle 
margins in our Russia business, we delivered a 
trading loss of £2.0m, which was a creditable 
performance in a very challenging market.

In Poland we had a strong trading performance 
driven by successful new product launches, 
improved market share and a backdrop of 
continued industry growth. 

Our business in China improved its trading  
proﬁt as the facilities matured and gained scale.

The segment delivered strong trading proﬁt, up 
18.3% to £50.9m in 2015 with 70bps of trading 
margin expansion driven by strong margin  
growth in Africa and the Balkans.

Outlook for 2016
In Ethiopia, we will continue to beneﬁt from the 
strong underlying economic environment and  
our recent investments in new facilities. In South 
America, we anticipate a continuation of subdued 
consumer conﬁdence against the backdrop of 
continued economic weakness, but expect to 
continue to outperform the market as we capitalise 
on our investments in the region. We expect to 
deliver a resilient performance in our Russian 
business, despite the uncertain economic 
environment, retaining good vehicle margins and 
leveraging our defensive Aftersales operations. 

Overall, we expect our Emerging Markets segment 
to deliver a solid performance in 2016.

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CENTRAL COSTS
Unallocated central costs for the full year are £30.0m  
before exceptional items (2014: £26.2m). Our costs remain 
well controlled with moderate inﬂationary increases in  
our underlying operational costs. Foreign exchange gains 
reclassiﬁed from other comprehensive income following the 
liquidation of overseas subsidiaries were offset by a charge  
to operating proﬁt arising from corrections to historic account 
balances in South America.

JOINT VENTURES AND ASSOCIATES
The Group has reported a £0.7m proﬁt after tax from joint 
ventures in 2015 (2014: a loss of £1.9m).

OPERATING EXCEPTIONAL ITEMS
In 2015, the Group has recorded a £49.5m non-cash 
exceptional impairment on the carrying value of goodwill 
attributable to our Russian business (see note 11 on pages 115 
to 116). This follows an impairment charge of £47.4m in 2014.

NET FINANCING COSTS
Net ﬁnancing costs, at £13.3m, are the same as last year. In 
2015, the Group reported a gain of £0.9m (2014: a gain of 
£1.5m) in our mark to market reporting of the hedges for the 
US loan notes and net interest income on pension assets of 
£4.2m (2014: net income of £5.1m).

TAX
As forecast, the effective tax rate for the year before 
exceptional items was 24%, the same as 2014 (excluding the 
tax free property gain in South Asia). We expect the effective 
rate to increase marginally for 2016. The Group has recorded 
an exceptional deferred tax charge of £4.8m relating to the 
derecognition of the net deferred tax asset related to our 
Russian business (see note 8).

NON-CONTROLLING INTERESTS
Proﬁts attributable to our non-controlling interests were  
£7.1m, compared to £7.6m in 2014. At year end, the Group’s 
non-controlling interests principally comprised a 33% minority 
holding in UAB Vitvela in Lithuania, a 30% share in NBT Brunei, 
a 10% share of Subaru Australia and 6% of the Motor & 
Engineering Company of Ethiopia.

FOREIGN CURRENCY
During 2015, the translation of the Group’s overseas proﬁts 
before tax into sterling at the 2015 average exchange  
rate negatively impacted the year’s results by £1.0m  
(2014: £20.9m).

DIVIDEND
The Board recommends a ﬁnal ordinary dividend of 14.1p  
per ordinary share which is subject to the approval of 
shareholders at the Annual General Meeting on 26 May 2016. 
This gives a total dividend for the year of 20.9p per ordinary 
share (2014: 20.1p). In future, the interim dividend will be set 
by a formula, and will be equivalent to 33% of the total 
dividend for the previous year.

PENSIONS
In 2015, the IAS 19 net post-retirement surplus was £98.9m 
(2014: £119.3m) and, in line with the funding programme 
agreed with the Trustees, the Group made additional cash 
contributions to the UK pension schemes amounting to  
£1.7m (2014: £1.7m). We have agreed with the Trustees that 
future cash contributions will continue at broadly this level.

Following the closure of the UK deﬁned beneﬁt pension 
schemes to future accrual in 2012, the Group has taken 
various steps to reduce its exposure to the associated deﬁned 
beneﬁt obligations. In November, the TKM Group Pension 
Scheme completed a buy-in transaction whereby the assets 
of the scheme were invested in a bulk insurance annuity 
contract that matches the beneﬁts payable to the members 
of the scheme. The contract has been structured to enable 
the scheme, in time, to move to a full buy-out, following which 
the insurance company will become directly responsible for 
the pension payments under the scheme (see note 5 on 
pages 105 to 106).

ACQUISITIONS AND DISPOSALS
During 2015, the Group acquired one retail centre in the UK 
for £5.1m and disposed of non-core businesses in Australia 
and its interest in the Excelease joint venture, generating 
disposal proceeds of £5.4m. In 2014, the Group disposed  
of multi-franchise dealerships in Finland and Australia 
generating disposal proceeds of £1.9m. 

CAPITAL EXPENDITURE
During the year, the Group invested £53.6m (2014: £35.0m)  
of net capital expenditure in the development of greenﬁeld 
sites and the enlargement of existing facilities, primarily in  
the UK, Asia Paciﬁc and the Emerging Markets. Included  
within the 2014 total was the disposal of a property in 
Singapore for £21.6m.

CASH FLOW AND NET FUNDS
Working capital ended the year at £24.4m (2014: £(16.2)m) 
following the normalisation of last year’s abnormally low 
position. At the end of 2015, the Group had net funds of 
£166.4m (2014: £210.2m) after buying back shares at a cost 
of £91.4m. At the end of 2015 we have £58.6m outstanding 
from the share buy back programme announced at our 
Interim Results.

inchcape.com 37

 
 
PROTECTING OUR 
BUSINESS
RISK MANAGEMENT

By managing our risks in a professional and consistent way, we operate with true ‘peace of mind’. 
Knowing that we have in place the right procedures, processes and frameworks to minimise risks from 
impacting our business, or to enable us to respond promptly and decisively when they do, gives us 
conﬁdence in our ability to achieve our strategic objectives and support the long-term sustainable 
growth of our business.

Types of risk
We identify between two broad types of risk. The iPOM 
framework encompasses and deﬁnes our approach to 
both types. Systemic risks are inherent to all processes in  
our business. These are known risks, which are largely stable, 
apply Group-wide and are managed through standard 
policies and procedures. Dynamic risks can impact our 
business as a result of the market or environment in which  
we operate. Dynamic risks may change in nature constantly, 
may be speciﬁc to a region, function or period of time, and 
therefore are managed through bespoke mitigation and 
response plans. 

How we govern risk management 
The Board has ultimate responsibility for ensuring that risk  
is managed across the Group and to assess the risks it is 
willing to take to achieve the Group’s strategic goals. The 
Board undertakes a formal review of the principal risk  
footprint at least annually or more frequently if required.

The Audit Committee has delegated responsibility from  
the Board and considers risk management, internal control, 
compliance and whistleblowing at every meeting. By 
continuously reviewing, assessing and challenging iPOM  
and the control framework, the Audit Committee monitors  
the risk appetite and culture which is embedded throughout 
the Group. The Committee chair reports to the Board after 
each meeting to ensure full oversight of the risks within the 
Group’s operations. Further information on work of the Audit 
Committee can be found on pages 57 to 60. 

Inchcape Peace of Mind – our approach to risk
Our reputation as a global automotive Distributor and Retailer 
is built on our ability to take calculated risks to create value  
for the Company and its shareholders, at the same time 
evaluating and managing those risks to protect that value. 

As a Group, we continue to experience an ever changing, 
dynamic risk environment where economic, political, 
environmental, social, legal and technological changes 
present a complex risk landscape which threatens our  
ability to achieve our strategic objectives. However, we believe  
that our diversity of brand portfolio and geographic spread, 
combined with our strong balance sheet, cost control and  
risk aware decision making processes, make us resilient to  
all but the most signiﬁcant and persistent risks.

All our colleagues have an inﬂuence over the amount of  
risk we take as a business – sometimes a great inﬂuence, 
sometimes less so. Inchcape Peace of Mind (iPOM) is our 
Group-wide risk management and governance framework 
which focuses on empowering each and every one of our 
colleagues to consider the risks associated with the decisions 
they take and to balance the potential consequences of  
their actions or inactions as they take them. Embedded in  
our day-to-day management practices, iPOM provides a 
simple framework to help us identify, manage and reduce 
our risks, raise awareness through education and training, 
give guidance and direction, encourage open and honest 
communication and engage our colleagues with the 
understanding of risks and how to manage them, no  
matter where they are in the world. 

Embracing iPOM is about ensuring that our strategy,  
initiatives and decision making balance performance  
with conformance; in essence making the right decisions  
in the right way to manage the risks we face and protect  
the long-term value and reputation of the Group. The iPOM 
framework therefore acts as a conduit to ensure that risk 
information ﬂows freely throughout the business, to enable  
the correct decisions based on a thorough assessment of 
good quality information.

38

Inchcape Annual Report and Accounts 2015

Risk management governance structure

Direction & 
Oversight

Policy, 
Framework, 
tools

Risk 
Information

Identiﬁcation, 
evaluation, 
management, 
evaluation, 
mitigation, 
monitoring

Board

Responsible for determining the Group risk appetite and oversight  
of principal risks to the Group’s strategic objectives

Audit Committee

Delegated responsibility from the Board for risk management, internal 
controls, compliance and whistleblowing

Group iPOM Committee

Day-to-day risk management oversight sits with the  
Group iPOM Committee

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Market iPOM Committees

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In each market, a Market iPOM Committee ensures that  
risk management remains a priority. Meetings and outputs are  
aligned with the Group iPOM Committee, Audit Committee and  
Board meetings

Management Teams

Risk owners

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Internal Audit

Review of internal 
controls, monitoring  
risk capture and 
mitigating actions

Corporate assurance

Leading continuous 
improvement in our  
risk management 
practices and risk 
mitigation techniques

Functional Assurance 
providers

Functional assurance 
teams provide in-market 
challenge to internal 
controls and risk 
mitigation plans

The Market iPOM Committees are the representative of iPOM 
in each of our markets. Operating under standard terms of 
reference, and aligned with the Group, the network of Market 
iPOM Committees helps to ensure a coherent approach to 
risk management and a consistent ﬂow of risk information 
across the Group.

Tools and techniques

The Group uses an online risk management and reporting 
solution to monitor both its systemic and dynamic risks (and 
associated action plans) at Group level and at market level. 
This, along with the iPOM risk management dashboard 
(reviewed at both Group and Market level) ensures the 
correct focus on risk management and mitigation at all 
management levels of the business. 

Risk management in action
The Group iPOM Committee has responsibility for operational 
risk oversight. Chaired by the Group Chief Executive, the 
constituent members are the Chief Financial Ofﬁcer, Chief 
Human Resources Ofﬁcer, Group General Counsel, Group 
Audit Director and Group Head of Corporate Assurance.

The Group iPOM Committee meets a minimum of six times  
a year to manage oversight of systemic and dynamic risks,  
at Group level and throughout the markets.

The remit of the iPOM Committee is broad, but its core  
focus areas are to ensure:

•  There is an appropriate mechanism in place to identify  

the most pressing risks the Group faces. 

•  Management teams have the correct focus on those  

risks, and in particular action plans to mitigate or respond 
to those risks.

•  A compliance programme is in place in all markets and 
ofﬁces, that meets or exceeds external benchmarks and  
is appropriate in terms of legal requirements, content,  
sector, cost and resources.

•  Internal controls are appropriate, well designed, 
and operating consistently across the Group. 

•  The Group’s fraud and whistleblowing programme is 

appropriately managed to reduce the risk of fraud, or 
respond quickly and decisively in the event the Group  
falls victim to fraud.

inchcape.com 39

 
 
 
 
 
 
PRINCIPAL RISK CONTINUED

Risk ownership
In order to best address the risks we face, we categorise our risks into eight risk categories. Each category has a deﬁned  
owner who assumes operational responsibility for managing the risks in that area and reporting to the Group iPOM and  
Audit Committees.

Strategic

Risk Category

Operational

Key 

Risk Category

Strategic, including competitor and consumer

Systems and Technology

Economic, Political and Environmental

People, including EH&S

Legal & Regulatory

Brand & Reputation

Risk Category

Finance

Risk Category

Tax, Pensions & Insurance

Key 

Brand Partners, Key Relationships & Reputation

Finance & Treasury

Key 

Key 

Principal risks 
Balancing performance and conformance means that we continuously strive to seize opportunities to create value but remain 
safe in the knowledge we have the ability to manage risks and protect the value we create. 

The principal risks to achieving our strategy are:

1

2

3

Loss of distribution contract with major OEM partner 

Signiﬁcant retrenchment of credit available to customers, dealer network or Inchcape plc

Brand failure globally

4 Major interruption to OEM partner operations or product

5 Major loss of conﬁdential or sensitive data

6

Failure to extract maximum value from acquisition strategy

7 Growth in new routes to market and methods of engaging the customer

8

Increasing demands (and capability) from our OEM partners for direct ownership of customer data restricts our ability  
to drive demand/margin

9 Non-compliance with dynamic changes in the regulatory environment

10 Interruption to iPOWER or major systems failure

11 Failure to attract, retain and develop our people

12 Failure to safeguard our customers and employees by not consistently applying EH&S standards across the Group.

13 Structural re-organisation strategy towards shared service centres increases the number of single points of failure

14 Internal controls failure sufﬁcient to affect reputation

15

16

Individual governments increasing restrictions on cross border currency movements leads to higher incidents of trapped cash  
across the Group

Dynamic changes in local or international tax rules (e.g. changes to transfer pricing rules as a result of the OECD’s Base Erosion  
and Proﬁt Shifting Initiative)

17 Social, political and regulatory instability in Russia and the surrounding region

18 Changes in legislation directly affect customer demand

40

Inchcape Annual Report and Accounts 2015

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16

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18

Low

Medium

High

Likelihood

Principal risk footprint 
The Group’s risk footprint comprises the most pressing risks that  
would cause the most damage to the reputation or ﬁnancial strength 
of the Company if they are not effectively evaluated, understood and 
managed. The risk footprint is distilled from Group-wide risk registers 
and is regularly reviewed by the Executive Committee, the iPOM 
Committee and the Board. 

For management purposes, each of the principal risks on the risk 
footprint is broken down into the underlying ‘causal factors’ and 
speciﬁc action plans built against each of these factors according  
to the established ‘3 lines of defence’ model. 

The key risks, which are given in detail below and on pages 42 and 43, 
are principal risks which are regarded as the highest priority and 
therefore of particular focus. A similar evaluation exists for the 
remaining constituent risks on the footprint. 

Additionally, we recognise, and are actively managing, further risks 
identiﬁed by our comprehensive risk management process, but these 
are deemed less material than the 18 principal risk factors noted on 
the footprint. We understand there are additional risks not currently 
known to management and we continuously improve our iPOM 
processes to identify, evaluate and mitigate these risks.

Key risks

1. Loss of distribution contract with major OEM partner

Causal factors

Impact 

Mitigating activity 

Distribution and Retail contracts are fundamental to our  
business model.

Although our brand diversiﬁcation strategy is designed to mitigate 
this risk, an event which leads to any of these contracts being 
cancelled, or not renewed, will have a signiﬁcant long-term impact 
to revenue and proﬁt. These causal factors could include but are  
not limited to:

•  Major fraud, bribery, data security or other systemic  

compliance failure.

•  Consistent failure to deliver to targets or standards in major 

markets or across multiple markets.

•  Failure to deliver value proposition to OEM partners.

•  Failure to deliver on growth strategy or defend our business  

model against new entrants.

•  Failure to connect with customers through social media.

Loss of signiﬁcant 
contribution to  
revenue and proﬁt.

Signiﬁcant impact  
to reputation.

Cost of business 
interruption/
closure and staff 
termination costs.

•  High quality operational, commercial  

and digital standards with multi  
channel assessments.

•  In depth, regular performance reporting  

and business performance reviews.

•  Clear compliance and risk management 

framework in place (including Minimum Control 
Framework) to address compliance issues.

•  Strong anti-fraud procedures including  

ethics and compliance hotline.

•  Dedicated in-house business development 

function oversees M&A and strategic direction.

•  Connected customers a core element of  

strategic direction.

2. Signiﬁcant retrenchment of credit available to customers, dealer network or Inchcape plc

Causal factors

Impact

Mitigating activity

Another economic crash may lead to a signiﬁcant constriction  
in global liquidity, so that funding is unavailable to the Group, ﬂoor 
plan ﬁnancing disappears and customer credit dries up.

New vehicle sales volumes rely on our customers,  
(both end users and dealers) being able to access affordable  
credit lines.

Credit availability globally, whilst improving, remains uncertain  
and a signiﬁcant retrenchment would adversely impact New  
vehicle volumes.

Underlying factors include:

•  Difﬁculty in securing credit for customers and ﬂoor plan ﬁnancing.

•  Funding unavailable, or unaffordable for the Group.

Adverse impact  
on retail volumes.

Dealers unable to 
ﬁnance inventory, 
impacting 
distribution 
volumes.

•  Maintenance of accounts with  

relationship banks.

•  Continuous monitoring of credit lines to 

customers and independent dealer network.

•  Close management of credit extended  

to independent dealer network including  
short-term support where needed.

•  Cash reserves maintained.

•  Headroom funding model to monitor cash ﬂow.

inchcape.com 41

 
 
PRINCIPAL RISK CONTINUED

3. Brand failure globally 

Causal factors

Impact 

Mitigating activity 

A major reputational disaster at one of our OEM partners leads  
to complete failure of that partner.

For example, a major recall or similar event causes loss  
of product reputation and severe drop off in customer demand.

An event of sufﬁcient signiﬁcance could also affect the reputation  
of our brand partners to the extent that viability of that brand  
is affected.

Loss of reputation 
of product leading 
to signiﬁcantly 
reduced demand. 

Loss of company 
reputation leading 
to failure of OEM 
partner.

4. Major interruption to OEM partner operations or product reputation 

•  Internal monitoring process and response  

plan for major incidents.

•  Brand diversiﬁcation strategy.

•  Monitoring procedures to anticipate product 

recalls and quality issues.

Causal factors

Impact 

Mitigating activity 

Our relationships with our OEM partners are crucial to our  
business model. 

Interruptions to this supply chain, or an event which adversely 
impacts the reputation of the products we sell could have a  
knock on effect on our revenues, margins or reputation.

Speciﬁc incidents could include:

•  Damage to product reputation in light of product recalls.

•  Signiﬁcant failure in the supply chain for key components  

or products.

5. Major loss of conﬁdential or sensitive data 

Adverse impact 
on supply of 
inventory.

Adverse effect on 
volumes, margin 
and reputation.

•  Monitoring of product recall events and 
continuous liaison with brand partners 
regarding quality/competitiveness of  
product lineup.

•  Diversiﬁcation of suppliers where possible.

•  Incident response and business continuity  

plan in place.

•  Lobbying and communication with OEM 

partners regarding competitiveness of models.

Causal factors

Impact 

Mitigating activity 

As a business we hold a large amount of conﬁdential data 
pertaining to ourselves, as well as our customers and OEM partners. 

Whilst we only hold and use this data for the purposes of 
continuously improving the customer experience we recognise our 
responsibility to protect this information and preserve its integrity.

Failure to protect conﬁdential or sensitive data, whether held 
electronically or otherwise, could result in signiﬁcant operational and 
reputational damage.

Impact on 
customer 
relationship  
and erosion  
of reputation.

Adverse ﬁnancial 
impact as a result 
of ﬁnes and 
sanctions.

•  Clearly understood data protection standards 

and processes.

•  Global cyber security steering committee  

in place.

•  Information assets deﬁned and security  

controls benchmarked to ensure best practice.

•  Clear IT security policies and procedures.

•  ITGC minimum standards developed  

and implemented.

6. Failure to extract maximum value from acquisition strategy

Causal factors

Impact 

Mitigating activity 

Inchcape complements its organic growth agenda by pursuing 
inorganic growth through acquisition.

Failure to identify and acquire the right targets, and efﬁciently 
integrate new businesses into our operation will adversely  
impact our ability to recognise the synergies and beneﬁts  
from those acquisitions.

Inefﬁcient or 
ineffective use of 
capital.

Lost revenue 
opportunities.

Adverse impact 
on control 
environment.

•  Internal Group strategy team run  

acquisition process.

•  Central synergy plan developed to inform 
business development activity and due 
diligence.

•  Detailed acquisition planning.

•  Due diligence performed in advance on  

all acquisitions.

•  Post acquisition reviews and detailed 

integration processes.

42

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7. Growth in new routes to market and methods of engaging the customer

Causal factors

Impact 

Mitigating activity 

The growth of online platforms to interact with customers presents  
in equal terms real opportunity to improve the customer offering, 
whilst at the same time presenting new risks around data protection, 
maintenance of standards and customer engagement through,  
for example, social media. Over the longer time horizon, major  
new competitors are likely to enter the market as the lines between 
automotive and technology become ever more blurred, threatening 
the existing retail model.

Volume and  
margin are 
adversely 
impacted across  
our markets.

Adverse impact 
on value of retail 
sites.

•  Connected customer a core part of strategy, 
including controlled use of social media as  
a communications channel.

•  Business performance reviews and regular 

margin monitoring.

•  Continue to closely monitor developments  

in new technologies.

•  Review investment opportunities in non-

traditional automotive markets.

8. Increasing demands from brand partners for direct ownership of data  
(e.g. connected customer) restricts our ability to drive demand/margin 

Causal factors

Impact 

Mitigating activity 

In the current connected environment there is an 
increasing trend from our brand partners to have  
both the appetite and the capability to reach out  
to our customer base directly, in effect bypassing the 
relationship between the retailer and even the distributor 
in favour of a direct relationship with the brand partner. 
The objective is to drive efﬁciency across their network. 
However, this may reduce the quality and intensity of  
the relationship that we as an intermediary hold with  
our customers and impact our ability to drive demand 
and margin through CRM.

Changing 
attitudes  
to vehicle 
ownership affect 
New vehicle sales 
into the long term.

Reduced ability  
to drive demand/
margin.

Loss of customer 
relationships and 
possibly reduction  
in loyalty.

•  Continuous review of operating procedures 

and commercial offering to ensure potential  
is maximised. 

•  Continuing dialogue with OEM partners to  
build awareness of the commercial beneﬁt  
of our involvement in the process.

Viability statement
The Board has assessed the prospects of the Company over a longer period than 12 months when considering going concern. 
This longer-term assessment supports the Board’s statements on both viability, as set out in this section of the Annual Report, and 
going concern statement made on page 79.

The plans and projections prepared as part of the Group’s annual strategic planning process consider the Group’s cash ﬂows, 
committed and uncommitted funding positions, forecast future funding requirements and lending covenants. 

As a component part of the strategic planning process, the Board adopts a rigorous approach to the identiﬁcation of the 
principal risks facing the Group and to the monitoring of the actions taken to mitigate these risks as outlined in this report.

The Board has prioritised a subset of these principal risks for the purposes of assessing the longer-term viability of the Group.  
The three risks modelled for the purpose are the loss of a major OEM distribution contract globally; the global collapse of an  
OEM partner; and a systemic loss of global credit and liquidity impacting both the Group’s access to inventory and ﬁnancing 
and our customers’ ability to ﬁnance vehicle purchases. Sensitivity analysis is undertaken to stress-test the resilience of the  
Group and its business model.

Whilst the Board has no reason to believe that the Group will not be viable over a longer period, the period over which the  
Board considers it possible to form a reasonable expectation as to the Group’s longer-term viability based on the risk and 
sensitivity analysis is the three-year period to December 2018.

The key assumption underpinning our ongoing viability is the continuation of our relationships with our OEM partners. The  
Board believes that whilst some OEM contracts may be less than three years, it is reasonable to expect that, over a three-year 
time horizon, a sufﬁcient number of contracts will have been renewed or replaced such that the Company will continue in  
viable operation. 

On the basis of an assessment of the principal risks, and on the assumption that the principal risks set out on pages 40 to 43  
are managed and mitigated in the ways described and based on the Board’s review of the strategic plan and the results of the 
sensitivity analysis undertaken, the Board has a reasonable expectation that the Company will be able to continue in operation 
and meet its liabilities as they fall due over the period to December 2018.

inchcape.com 43

 
 
MAKING A POSITIVE 
DIFFERENCE
CORPORATE 
RESPONSIBILITY

Developing our PEOPLE
Inchcape’s employees are its most valuable asset; it is  
the talent and dedication of our people that delivers  
the Group’s results, year after year. The four pillars of our 
people engagement strategy, Right People, Right Learning, 
Right Reward and Right Culture, have been developed to 
ensure that as a company we value and nurture this most 
important resource. 

The Right People – recruiting and retaining talented people, 
who understand their role in delivering outstanding results. 

Talent planning and performance management sit at  
the heart of our people strategy, as we look to ensure  
that we have the Right People in every role. Whilst there  
are continuous processes in place, we also have a more 
detailed review and planning session in each market and 
head ofﬁce, at least once a year. 

Our employee base is diverse and reﬂects the different 
cultures and markets in which we operate. As a global 
business we are able to provide our people with the 
opportunity to gain experience in different countries, 
encouraging personal development and growth for  
many of our colleagues. We recognise that the growth  
and development of our people directly affects the growth 
and success of our Company. By actively encouraging this 
level of engagement across all markets, we not only attract, 
but also retain the best talent.

The Right Learning – enabling our people to deliver  
the Company’s objectives by providing the right training  
and development.

As an example, Inchcape Hong Kong has introduced  
a new training scheme to encourage young people  
to embark upon a career in Aftersales. This professional 
development scheme provides soft skills training, career 
advice and mentoring. New recruits are attracted through 
targeted digital platforms, such as YouTube and Facebook, 
with successful apprentices being recognised for their 
achievements at the end of their placement. 

We are passionate about sharing our expertise with fellow 
colleagues, and with the wider communities in which we 
work. Our Hong Kong operation has also worked with the 
Toyota Technical Education Program (T-TEP) in partnership 
with selected secondary schools in Hong Kong since 1995, 
offering subsidies, teaching facilities, modern teaching 
equipment and tools to improve routes to employment  
in the auto industry for young people.

At Inchcape we take our Corporate Responsibility (CR) very 
seriously; acting responsibly towards the communities and 
environments in which we work, and towards individuals and 
society in general. For more than 170 years we have believed 
that our business is about more than just the bottom line.

We are now evolving our CR strategy and aligning it with  
our strategic objectives, focusing on where we can make  
the most positive impact for our stakeholders and society.  
This will build on the progress we made in 2015 across the  
ﬁve CR metrics through which we monitor our activity: 
developing our People; improving Customer experiences; 
working with innovative OEM Partners; supporting local 
Communities; and managing our impact on the Environment.

CR is governed through the Corporate Responsibility 
Committee, which meets twice yearly and is served by a 
central CR operational team and a network of CR Champions 
across our 26 markets. The CR Committee is attended by Ken 
Hanna, Chairman, Coline McConville, Non-Executive Director, 
Stefan Bomhard, Group Chief Executive Ofﬁcer, and Alison 
Clarke, Chief Human Resources Ofﬁcer, reﬂecting its 
importance to the business. 

As we focus on growing the business over the coming years, 
the contribution of CR will become increasingly important;  
we will strive to be at the forefront of progress, innovation  
and stewardship in corporate responsibility – it is an integral 
part of Inchcape.

TILL VESTRING

Chair of the CR Committee

44

Inchcape Annual Report and Accounts 2015

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The Right Reward – celebrating success and the contribution 
of our people, at every level, in every market, and ensuring 
that they are rewarded for their commitment and expertise. 

We recognise, celebrate and reward the contribution  
our people and teams make to deliver our challenging 
business ambitions.

Our rewards policy recognises excellent personal 
performance and the special contribution that employees  
of all levels make to the business. Recognition programmes, 
such as ‘Leading Lights’ in our UK Retail business, make it  
easy to identify and reward precisely those contributions  
that we, our partners and customers all value so highly.

In addition to market-competitive salaries, we also provide a 
suite of employee advantages, from discounted car purchase 
and services, to medical cover and volunteer days. This 
contributes towards making Inchcape a Right Reward culture.

The Right Culture – creating an exciting and engaging place 
to work, where people are treated with respect and look 
forward to making a difference each day. 

Communication with our colleagues is maintained through 
regular multi-channel dialogue, enabling a ﬂow of information 
via a number of channels, disseminated through ‘town hall’ 
meetings, line manager brieﬁngs, newsletters, our intranet  
and colleague events. 

In our China business, for example, town hall meetings are 
held to enable all staff to contribute ideas and feedback. 
Allied to family days, community activities and sports days,  
this has contributed to 100% participation in staff surveys  
and constant year-on-year rises in staff engagement. In all  
we do, we ensure that Inchcape remains a great place to 
work, with zero tolerance of anti-social activities and bullying.

To support the four pillars of our people strategy, we use 
individual development plans, talent reviews and succession 
planning, ensuring that managers are equipped to build, 
maintain and develop expert teams of professionals in every 
ﬁeld. We have run engagement surveys (known as Heartbeat) 
every year since 2007, which give every employee the 
opportunity to feed back on their experience as an Inchcape 
colleague. Line managers use the results of the survey to 
create action plans that respond to challenges and improve 
employee engagement. 

We are very proud that Inchcape UK has been named  
one of The Sunday Times’ ‘Top 25 Best Companies to Work  
for’ for three consecutive years and in Hong Kong, we  
have won awards for both Employer of Choice and  
Employee Engagement. 

Human rights

We embrace, support and respect the human rights of 
everyone we work with and we comply fully with appropriate 
human rights legislation in the countries in which we operate. 
We don’t use or accept forced, bonded or involuntary prison 
or child labour. We only employ people who choose to work 
freely and respect their rights to equal opportunities and 
freedom of association. 

Improving CUSTOMER experiences
Across all our markets, we set out to build long-term 
relationships with our customers and we encourage their 
feedback in order to continually improve on the experiences 
they have with us, online, over the phone or in person.

We receive hundreds of complimentary letters, emails and 
calls from customers each year and feature one every week 
in our ‘Voice of the Customer’ email which is received by all 
our employees, across all 26 markets every Monday morning. 
We were also delighted to receive several awards in 2015 for 
our Customer focus and very proud that Inchcape Fleet 
Solutions (IFS) was awarded the ServiceMark Accreditation 
from the Institute of Customer Service, the UK’s professional 
body for customer service. IFS was awarded in recognition  
of the work their customer service teams do every day to 
ensure all customers receive the highest level of customer 
service; from the moment of enquiry, right through to the 
delivery of products/services, the provision of Aftersales  
care and support together with the successful resolution  
of any issues raised. 

In 2015, we carried out over 5,000 mystery shop exercises  
and conducted over 16,000 customer interviews. This helps  
us gauge their satisfaction and needs, report on our current 
performance and pick out examples of extraordinary 
commitment. Further insights are sourced by tracking data, 
efﬁciency and customer trends across our 140 websites.

Around the world, good service is no longer considered a 
differentiator. It has become a necessity. Our ability to impress 
customers extends beyond the sale. Wherever they are in  
the ownership lifecycle, car owners demand constant care.

That’s why, in 2015 we kicked off the Connected Customer 1st 
(CC1) programme which has since become the foundation 
of our Leading in Customer Experience driver. We developed 
the programme to build on our insights into the customer 
journey and create stand-out experiences for our customers 
in an ever moving omnichannel world. Customer research 
began in 2015 in several of our markets and will continue  
in 2016, leveraging our global scale and presence across  
the globe. 

Working with innovative PARTNERS
As a Retailer and Distributor, we form successful relationships 
with the best car brands in the world. We aim to share best 
practice, learning from our OEM partners whilst passing on 
our own experience and expertise. This example of good 
corporate responsibility is often measured through the 
accolades passed on to us by the manufacturers. Sometimes 
it is the superb example set by an individual that makes all 
the difference.

In 2015, we were delighted to receive several awards from  
our OEM partners – testament to the passion our colleagues 
across the world have for the brands they represent. A few  
of those awards are listed below. Further details of these  
and many other accolades, can be found on the Inchcape 
News section of our website. 

•  Crown Motors Limited, Inchcape’s subsidiary business in 
Hong Kong, was awarded the prestigious Outstanding 
Customer Service Award by the Toyota Motor Corporation 
for the eighth consecutive year and won the Toyota Triple 
Crown Award for the 24th consecutive year.

•  NBT Brunei also won the Toyota Triple Crown Award Customer 

Service Excellence Award for the 7th consecutive year. 

•  For the second year running, Inchcape Volvo Musa Motors 

in Moscow was awarded the title of ‘Best Volvo Dealer’.
•  Our Lexus Guildford site won Centre of the Year Award  

for the third time and Porsche Bournemouth won the Total 
911 magazine award, having been shortlisted in the 
category by the publication’s readers. 

inchcape.com 45

 
 
CORPORATE RESPONSIBILITY CONTINUED

•  At the 2015 Annual BMW/MINI awards gala, Inchcape 
Motors Poland was recognised in three categories:  
F&I Dealer of the Year, BMW Dealer of the Year and  
MINI Dealer of the Year.

Working with innovative and supportive brand partners allows 
us to also focus our corporate responsibility on our immediate 
environment. In September 2015, BMW/MINI in Reading 
ofﬁcially unveiled its new centre at a special customer launch 
event which featured over 400 guests and a host of activities, 
from driving simulators to a win a car competition. Now the 
biggest BMW/MINI retail centre in the UK, the innovative new 
site is spread over three storeys and delivers exceptional levels 
of customer service and includes a wealth of environmentally 
friendly features. The building, amongst many other elements, 
includes: water recycling, solar panels, waste recycling, cycle 
parking, Bat and Bird boxes, Green Guide rated ﬁnishes  
and energy efﬁcient ﬁttings. BREEAM, the world’s longest 
established method of assessing and certifying the 
sustainability of buildings, has given the state-of-the  
art retail centre a rating of ‘very good’. 

Success is not just about working well with our OEM partners. 
We have been equally proud of partnerships with regulatory 
bodies. The Ethiopian Revenues & Customs Authority, for 
example, made a special award to our MOENCO business  
for its exemplary Tax and Duty compliance. 

Supporting local COMMUNITIES
Support for local communities is where we can most clearly 
demonstrate our positive impact on society. Across 26 markets 
we aim to think globally but integrate locally, participating 
actively in the communities in which we operate. 

Our approach has always been to encourage our people to 
support their local communities in the most appropriate way. 
This employee centric approach ensures that the people with 
the best local insight can direct how the Company makes its 
contribution and we have highlighted some of the work that 
we have been undertaking in our communities in this report.

CASE STUDY

Rock climbing with the Singapore  
Children’s Society
In December 2015, colleagues from Inchcape 
Singapore embarked on an activity to add a little  
joy to the lives of under-privileged children from the 
Singapore Children’s Society.

Inchcape Singapore have supported the Singapore 
Children’s Society over many years and last year 
decided to fulﬁl the children’s Christmas wish with a 
rock-climbing activity. To kick start the event, Mr. Victor 
Tan, Director of Infrastructure Development and 
Facilities, welcomed the children and presented a 
cheque of SIN$1,000 to the Singapore Children’s 
Society. The rock climbing activity was a memorable 
event and a wonderful day for everyone present.

46

Inchcape Annual Report and Accounts 2015

CASE STUDY

Mother and Child Rehabilitation Centre  
in Ethiopia
Inchcape has supported the Mother and Child 
Rehabilitation Centre (MCRC) in Ethiopia since 2002. 
This amazing charity, run by Jutta de Muynck, the wife  
of Chris de Muynck, Managing Director of our Ethiopian 
business, takes in disadvantaged children from Addis 
Ababa and beyond, providing food, shelter, education, 
medical care and therapy for the children and their 
parents. MCRC aims to help them recover from past 
traumas and equip them through employment and 
personal training with the means to be independent 
and successful in the future. 

CASE STUDY

Atkins Kroll, Care Saipan Fund
The island of Saipan in the Northern Paciﬁc was badly 
hit by Typhoon Soudelour in August 2015, damaging 
homes and businesses and leaving the island without 
water or electricity. An Atkins Kroll (AK) Care Saipan fund 
was immediately set up with the Inchcape Group 
donating US$20,000 to kick off the fundraising efforts, 

AK employees’ and volunteers worked together to 
collect, wrap and pack relief supplies for 62 fellow 
colleagues and their families. Food, cooking fuel, 
mosquito coils, ﬂashlights, candles, household goods, 
personal care products, gas containers as well as  
linens and hand towels were sorted and packed 
into a 24-foot container. 

AK Saipan also provided the charity and the military 
with additional vehicles and set up a shelter and 
provided hardship payments for colleagues affected. 
They provided emergency transport for customers, who 
also received discounts on car repair bills and 
advantageous prices on damaged stock.

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CASE STUDY

Inchcape Australia – The Big Issue and the 
power of passion
In April 2015, over 40 of Inchcape Australia’s (IAL) Senior 
Leaders gathered in ofﬁces in Sydney to hear of one 
organisation’s vision to help homeless, marginalised 
and disadvantaged people positively change their 
lives. The Big Issue magazine is found in a number of 
countries but in Sydney, IAL leaders heard how being 
clear on why you exist and the vision which drives you 
can help you achieve amazing things. 

IAL leaders took on the Big Issue Challenge to  
sell magazines on the street in downtown Sydney, 
applying their sales and networking skills to raise  
money. Over four hours, through sales on the street  
and networking online, the IAL team managed to  
raise nearly AUS$10,000! 

CASE STUDY

Technician from Inchcape UK puts his volunteer 
days to good use.
Andy Smith from Audi Macclesﬁeld has a passion for 
martial arts and decided to put his volunteer day to 
good use by teaching self defence to young adults  
with learning disabilities. Andy has been training in 
martial arts for 33 years and teaching for over 10. 

Thanks to the Inchcape in the Community scheme  
and his bosses at Macclesﬁeld Audi, Andy was given 
two half days off to be able to deliver two self defence 
sessions to young adults with learning disabilities.  
The Looking Forward Activities Group provides fun 
activities and life skills for young adults with a wide 
range of learning disabilities. Andy held two sessions 
and both groups were very enthusiastic and had  
great fun learning a wide range of simple self  
defence techniques. 

Managing our impact on the ENVIRONMENT
As a Retailer and Distributor, Inchcape has no manufacturing 
footprint to minimise, however we collect data for all material 
emissions for which we deem ourselves to be responsible and 
look to seek ways in which to minimise our footprint. 

Data is collected for three key performance indicators: 

•  Energy – our global electricity and gas usage. 
•  Transport – Movement of cars and parts from the point of 

ownership (which means legal and contractual ownership) 
to the point we cease to have legal ownership. This includes 
customer test drives. 

•  Business travel – the movement of our people. 

Methodology

The methodology used to calculate the Group’s greenhouse 
gas emissions is based on the Environmental Reporting 
Guidelines, including mandatory guidance (June 2013) 
issued by the Department for Environment, Food and Rural 
Affairs (DEFRA) and includes DEFRA’s 2015 conversion factors. 

Data collection and reporting period 

Data has been collected for all markets from 1 January 2015 
to 31 December 2015. 

The level at which we report is by business unit for each 
market. This covers our retail operations, distribution operations 
and business service operations. 

We have reported on all material emissions for which we 
deem ourselves to be responsible and which fall within our 
operational and control boundaries. 

Scope

Description 

Scope 1 (direct emissions)

Scope 2 (energy indirect)

Scope 3 (other indirect)

Transport of vehicles and parts 
including test drives 

Electricity and gas used by the 
Group’s operations

Employees’ business travel by air, 
car or train

Intensity ratio
The Group’s intensity ratio is revenue per tonne of CO2. This 
allows for a fair comparison over time of CO2 emissions, given 
the growth trajectory envisaged by the Company and 
cyclical variations in business activity. 

Total greenhouse gas emissions 2015
Our growth in revenue at constant currency exceeded  
that in emissions and the Group’s intensity ratio improved by  
2.4%. However, the Group’s CO2 emissions increased by 5.2%, 
primarily driven by New vehicle sales growth which resulted in 
higher emissions from transportation of vehicles. In our largest 
market for New vehicle orders, Australia, we were required to 
source some vehicles from alternative ports, contributing to 
the increase in CO2 emissions. This was offset, however, by 
improved control of electricity consumption, despite 
increased business activity, and a reduction in business travel.

Emissions from:

Combustion of fuel and  
operation of facilities

Electricity, heat, steam and  
cooling purchased for own use

Total footprint 
Intensity ratio: £k per tonne of CO2

Tonnes of CO2e
FY 2015 

FY 2014

73,107

66,713

74,832

147,939

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73,855

140,568

45

Intensity ratio is calculated using revenue at constant currency  
(as in the 2014 Annual Report). 
The 2014 ﬁgure has been adjusted following the receipt of ﬁnal year 
emissions ﬁgures from selected markets, that were received after 
publication of the 2014 Annual Report. The revised 2014 ﬁgure is 
approx. 2% higher.

inchcape.com 47

 
 
BOARD OF DIRECTORS
DRIVEN BY TRUST

Standing, left to right

Till Vestring, Nigel Northridge, 
John McConnell, Alison Cooper, 
Nigel Stein, John Langston

Seated, left to right

Stefan Bomhard, Ken Hanna, 
Coline McConville

Biographies on page 50

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DRIVEN BY TRUST

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inchcape.com 49

 
 
BOARD OF DIRECTORS

1 Ken Hanna
Chairman

Appointment to Board:

September 2001

3 John McConnell
Group Finance Director

Appointment to Board: 

October 2009

5 John Langston
Non-Executive Director

Appointment to Board: 

August 2013

Skills and experience:

Skills and experience:

Skills and experience:

Prior to becoming Chairman, Ken was  
an Executive Director and Chief 
Financial Ofﬁcer of Cadbury plc. 
He was previously a Partner of 
Compass Partners International and 
Group Finance Director and Chief 
Executive of Dalgety plc. He has 
previous experience with Guinness plc 
(now Diageo plc), Avis Europe and 
Black & Decker.

John was appointed as Group  
Finance Director in October 2009,  
having worked with the Group since  
1999. John joined Inchcape Australasia  
as Chief Financial Ofﬁcer before  
moving to the role of Chief Executive 
Ofﬁcer of Australasia. 

Other appointments:

Non-Executive Director of UBM plc

Other appointments:

Chairman of Aggreko plc 

Other past appointments:

Non-Executive Director and Chairman 
of the Audit Committee of Tesco plc 

Committee membership: 

Chair of the Nominations Committee 
and a member of the Remuneration 
and CR Committees. 

2 Stefan Bomhard
Group Chief Executive

Appointment to Board:

April 2015

Skills and experience:

Before joining Inchcape, Stefan was 
President of Bacardi Limited’s European 
region and was also responsible for 
Bacardi’s Global commercial 
organisation and Global Travel Retail. 

He served as Chief Commercial Ofﬁcer 
of Cadbury plc, Chief Operating Ofﬁcer 
of Foodsolutions, Europe, a division of 
Unilever plc, together with general 
management, retail and franchise 
experience at Diageo, (Burger King) 
and Procter & Gamble.

4 Alison Cooper
Non-Executive Director

Appointment to Board: 

July 2009

Skills and experience:

Alison is Chief Executive of Imperial  
Brands PLC.

Alison joined Imperial Tobacco in 1999  
and through a number of senior roles 
has contributed signiﬁcantly to the 
international expansion. She was 
appointed as Chief Executive in May 
2010 and since her appointment she 
has led the development and 
implementation of Imperial Tobacco’s 
sustainable growth strategy. 

Alison is a Chartered Accountant 
and was previously with 
PricewaterhouseCoopers LLP.

Committee membership: 

Member of the Audit and Nominations 
Committees.

50

Inchcape Annual Report and Accounts 2015

John was formerly Finance Director of 
Smiths Group plc, having  
been a member of the Board since 
2000. John held a number of senior 
commercial positions at Smiths Group 
including Group Managing Director  
of the Speciality Engineering division 
and the Detection and Sealing 
Solutions divisions. 

John is a Chartered Accountant. 

Other appointments: 

Non-Executive Director and Chairman 
of the Audit Committee of Rexam PLC. 

Committee membership: 

Chair of the Audit Committee  
and member of the  
Nominations Committee.

6 Coline McConville
Non-Executive Director

Appointment to Board: 

June 2014

Skills and experience: 

Coline spent 10 years with Clear 
Channel International Limited  
where she was Chief Executive Ofﬁcer 
– Europe, from 2003 to 2006, having 
previously been Group Development 
Director and Chief Operating Ofﬁcer. 
Coline began her career in 
management consultancy, working 
with both McKinsey & Co and 
LEK Partnership.

Other appointments:

Non-Executive Director of UTV Media, 
Fevertree Drinks plc, Travis Perkins plc 
and a supervisory board member  
of TUI AG. 

Other past appointments:

Non-Executive Director and Chair of  
the Remuneration Committee of TUI 
Travel plc and Non-Executive Director  
of Wembley Stadium, Shed Media plc 
and HBOS plc. 

Committee membership: 

Chair of the Remuneration Committee 
from January 2016 and a member of  
the CR and Nominations Committees.

7 Nigel Northridge
Senior Independent Director 

Appointment to Board: 

July 2009

9 Till Vestring
Non-Executive Director

Appointment to Board: 

September 2011

Skills and experience: 

Skills and experience: 

Till is Senior Partner of Bain & 
Company South East Asia. Till has a 
25 year career at Bain & Company of 
which the last 20 were spent in Asia 
with postings in Sydney, Hong Kong, 
Tokyo and Singapore. 

He has served as head of Bain’s 
Automotive & Industrial Practice in  
Asia, Managing Partner for South  
East Asia, as well as on Bain’s 
global Partner Nomination & 
Compensation Committee.

He has extensive experience advising 
multinationals on growth strategy  
across Asia as well as advising leading 
Asian companies on strategy, M&A  
and organisation.

Other appointments: 

Non-Executive Director of  
Keppel Corporation 

Committee membership:

Chair of the CR Committee and a 
member of the Remuneration  
and Nominations Committees.

Nigel spent 32 years with Gallaher  
Group plc in sales and marketing  
roles before becoming the Group Chief  
Executive in 2000.

Other appointments:

Chairman of Debenhams plc and 
Hogg Robinson plc. 

Nigel will step down as Chairman of 
Debenhams plc in April 2016.

Other past appointments: 

Chairman of Paddy Power plc and 
Non-Executive Director of Aer Lingus plc, 
Thomas Cook plc and Agrekko plc 

Committee membership: 

Chair of the Remuneration Committee 
until December 2015 and a member of 
the Audit and Nominations Committee.

8 Nigel Stein
Non-Executive Director

Appointment to Board: 

October 2015

Skills and experience:

Nigel was appointed Chief Executive  
of GKN plc in January 2012 and has 
previously held a range of commercial, 
general management and ﬁnance 
roles at GKN, including Group  
Finance Director and Chief  
Executive Automotive.

He is a member of the Institute of 
Chartered Accountants of Scotland. 

Other appointments:

Chairman of the UK Automotive 
Council.

Other past appointments: 

Non-Executive Director of Wolseley plc. 

Committee membership: 

Member of the Audit and  
Nominations Committees.

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inchcape.com 51

 
 
CORPORATE 
GOVERNANCE REPORT
A DISCIPLINED APPROACH 

to our good governance practices that we have been  
able to deal with the changes to the Board during the year 
appropriately. All aspects of governance come under scrutiny 
during times of change and I am pleased the succession 
planning process, which is ﬁrmly embedded at Board level, 
has enabled the Nominations Committee to act effectively.

 The recruitment process for Stefan Bomhard was ﬁnalised in 
January 2015 and was reported to shareholders in last year’s 
Annual Report. Stefan joined the Group on 1 April 2015 and 
his statement on pages 20 to 26 sets out his experiences in  
his ﬁrst year of ofﬁce and his vision for the future of the Group.  
As stated in my statement on pages 18 to 19, John McConnell 
left the Group on 26 February after 16 years’ service. Richard 
Howes will become Chief Financial Ofﬁcer on 11 April 2016. 
Following the departure of Simon Borrows and Vicky Bindra, 
Nigel Stein was appointed as a Non-Executive Director in 
October 2015. Details of the recruitment process can be 
found in the Nominations Committee Report on page 60. 

I am also pleased to report that Nigel Northridge became  
the Senior Independent Director in May 2015. 

This year, we have decided to focus the governance report 
more clearly on the key information to shareholders to 
encourage clear and concise reporting. As a result, we  
have moved some of the more routine information on to  
our website. You will be able to ﬁnd information on our  
investor relations diary and the Committee responsibilities  
at www.inchcape.com/governance, and I hope you ﬁnd  
this more concise report useful and informative. 

KEN HANNA

Chairman

Dear Shareholder 

It is the tone set by the Board and the values within the 
organisation that create a culture in which the business  
can thrive and create long-term shareholder value. The 
culture is underpinned by a disciplined approach to 
governance throughout the Group, starting at Board level.

It is the Board’s role to support the Executive Directors  
in deﬁning the Group’s strategy and it is here that the 
knowledge, skills and experience of Board members is key  
to enhancing the quality of the strategic proposals. The Board 
considered and approved the new strategic agenda, as set 
out on pages 20 to 26, and is fully supportive of the strategic 
objectives and of Stefan and his team’s ability to deliver. In 
order to effectively monitor implementation and progress,  
the strategic objectives have been added to the 2016  
Board agenda to enable the Board to review each  
objective in detail throughout the year.

As previously mentioned, it is vital to get the right composition 
of Directors for the Board in order to enhance the delivery of 
the Group’s strategic objectives and I believe it is a testament 

KEN HANNA

Chairman

Statement of Code Compliance
The Company was compliant with the provisions of the 2014 UK Corporate Governance Code throughout the year.

Details of compliance with Code provision C.3.7 are given in the Audit Committee Report on page 57.

The information required under DTR7 is given on pages 52 to 80 and forms part of this Report. 

52

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Leadership
The Board of Directors is responsible for the long-term  
success of the Company, for the beneﬁt of its stakeholders.  
This is achieved by: 

•  setting the strategic objectives of the Group; 
•  ensuring effective systems are in place to manage risk;
•  ensuring the Group operates effective controls to  

minimise risk; 

•  ensuring that the Group has a strong set of values  

and standards to which it adheres; and 

•  ensuring the correct people are in place to run the 

business and to monitor their performance.

The Board has a schedule of matters reserved for the Board, 
which can be found at www.inchcape.com/governance.

The Board delegates certain responsibilities to its Committees 
and the reports can be found on pages 57 to 77. The terms  
of reference for each Committee can be found at www.
inchcape.com/governance. 

After each Committee meeting, the chairperson will report  
to the Board on the business discussed to ensure that all 
Directors are kept up to date with developments and the 
decisions being taken. The Committees will also recommend 
certain matters to the Board for its approval.

The Executive Committee consists of the functional directors 
and regional chief executives. Their biographies can be  
found on page 22. The iPOM Committee is the Group’s risk 
committee. Further details of the risk management framework 
can be found on pages 38 to 43. 

Governance structure

The Board Inchcape plc
Collectively responsible for the long-term success of the Company

Audit  
Committee

Remuneration  
Committee

Executive  
Committee

Nominations  
Committee

Delegated 
authorities:

Financial 
Reporting 
Risk Management 
Internal Control

Delegated 
authorities:

Remuneration 
Policy 
Incentive plans 
Performance 
targets 

Delegated 
authorities:

Group Strategy  
Operational 
Management

Delegated 
authorities:

Board 
composition 
Diversity 
Succession 
planning

Corporate 
Responsibility 
Committee

Delegated 
authorities:

CR Strategy 
CR Policy

Committee Report 
page 57

Committee Report 
page 63

Committee Report 
page 60

Committee Report 
page 62

Delegated 
authorities:

Risk oversight 
Minimum Control 
Framework

See page 38

iPOM  
Committee

Group Capital 
Committee

Delegated 
authorities:

Oversight of 
Group 
capital 
expenditure

inchcape.com 53

 
 
CORPORATE GOVERNANCE REPORT CONTINUED

Board and Committee meetings
The meetings are structured to allow sufﬁcient time to discuss and review ﬁnancial and operational performance, progress 
against objectives and strategy and the assessment of risk and internal controls.

Name

Vicky Bindra

Stefan Bomhard

Simon Borrows 

Alison Cooper

Andre Lacroix

Ken Hanna 

John Langston 

John McConnell

Coline McConville

Nigel Northridge* 

Nigel Stein*

Till Vestring 

Board 

Audit Committee

Remuneration 
Committee

Nominations 
Committee

CR Committee

Scheduled/Attended Scheduled/Attended Scheduled/Attended Scheduled/Attended Scheduled/Attended

3/3

4/4

2/2

5/5

1/1

5/5

5/5

5/5

5/5

5/4

2/1

5/5

3/3

–

1/1

4/4

–

4/4

4/4

–

–

1/0

1/0

–

–

–

–

–

–

2/2

–

–

2/2

2/2

–

2/2

1/1

–

1/1

1/2

–

2/2

2/2

-

2/2

2/2

–

2/2

1/1

1/1 

–

–

1/1

2/2

–

–

2/2

–

–

1/1

*  Nigel Northridge and Nigel Stein were unable to attend the November Board and Audit Committee meetings due to prior commitments.  

Both Directors attended debrief meetings with the Chairman, Group Chief Executive and Group Strategy Director after the meetings.

Roles and responsibilities 
In accordance with the Code, the roles of Chairman and 
Group Chief Executive are separate. With the appointment  
of a new Group Chief Executive and Senior Independent 
Director during the year, the roles and responsibilities were 
reviewed to ensure that they remain appropriate and 
communicated to the individuals upon appointment. 

Non-Executive Directors 
The role of the Non-Executive Directors is to bring a wide range 
of experience, knowledge and skills to the Board, provide 
independent judgement in discussions and constructively 
challenge the Executive Directors. The Non-Executive Directors 
are all considered to be independent for the purposes of the 
Code. The information on diversity, experience and length  
of service is given in the biographies on pages 50 to 51. Any 
term beyond six years is subject to rigorous review.

The Chairman and Non-Executive Directors met without the 
Executive Directors, and the Senior Independent Director and 
the Non-Executive Directors met without the Chairman at the 
meeting in October.

KEN HANNA

Chairman

STEFAN BOMHARD

Group Chief Executive

NIGEL NORTHRIDGE

Senior Independent Director

•  To lead an effective Board by 
providing direction and focus  
and promoting open and 
constructive debate.

•  Ensuring that Directors receive 
information that is accurate,  
relevant and timely.

•  Responsibility for composition  
of the Board to ensure that the 
members have the right mix of  
skills, knowledge and experience.

•  To chair the Nominations  

Committee.

•  To develop the Group’s  

strategy and business plans 
for approval by the Board.

•  To run the Group’s  

day-to-day operations.
•  Report to the Board on  

performance, implementation  
of strategy and signiﬁcant 
developments.

•  To lead the Executive Committee  
in implementing strategy and 
managing risk and the internal 
control framework.
•  To regularly engage  
with shareholders on  
the Group’s activities and  
progress against objectives.

•  To act as a sounding board  

for the Chairman.

•  To serve as an intermediary  

to other Directors.

•  To be available to shareholders, 

should they have concerns which 
have not been resolved through 
normal channels.

•  To hold an annual meeting of 

Non-Executive Directors to evaluate 
the performance of the Chairman.

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Effectiveness
On appointment, Non-Executive Directors receive a letter of 
appointment setting out the time commitment required and 
the Company’s policy on additional appointments. Details of 
the composition of the Board, appointments to the Board and 
the time commitment required are given in the Nominations 
Committee Report on page 60. 

Development
New Directors have a tailored induction programme  
designed to ensure that they have sufﬁcient knowledge  
of the business and the context in which it operates. A 
standard induction would include a site visit either in the  
UK or overseas and one-to-one meetings with the Executive 
Committee members and certain key individuals including 
the Group Company Secretary, Group Financial Controller 
and Group Audit Director. 

In order to ensure that the Non-Executive Directors update 
their knowledge and skills regularly, training is provided for  
the Board and individual Directors as required. During the 
year, external experts are invited to Board meetings to speak 
on relevant topics to give additional insight and context to  
the business. At the overseas Board meeting in Athens,  
the Professor of Economics at Athens University gave a 
presentation to the Board on the Greek economy giving  
the Board further insight into the challenges and 
opportunities faced by the business in that region. 

Information and support 
The Group Company Secretary is responsible for ensuring that 
the Board has access to relevant and accurate information. 

The Board agendas are agreed in advance by the Chairman 
and the Group Chief Executive and include regular items 
such as reports from the Group Chief Executive, the Chief 
Financial Ofﬁcer and Investor Relations. The reports include 
information on operational matters, ﬁnancial performance 
and strategic developments. Regional updates, designed  
to give a deeper view of the markets, are given throughout 
the year by the relevant market Chief Executive. 

The Group Company Secretary also supports the Board  
by providing advice and services, including access to 
independent advice, and ensures that an accurate record of 
the meeting is taken. If a Director has any concerns about the 
Company or any of the decisions being taken, this would be 
recorded in the minutes. No such concerns arose during 2015. 

Evaluation 
Following the external evaluation in 2014, the Board 
evaluation for 2015 was facilitated internally by way of  
a questionnaire which covered oversight responsibilities, 
Board effectiveness, the performance of the Chairman and 
the operation and effectiveness of each of the Committees. 

The Chairman reviewed the performance of the Non-
Executive Directors at one-to-one meetings throughout the 
year and the performance of the Chairman was discussed  
by the Non-Executive Directors without the Chairman present, 
taking into account the views of the Executive Directors. 

The results were analysed by the Company Secretary and the 
ﬁndings presented to the Board for its review. The results were 
very positive and indicated a Board that works well together, 
in an environment of openness and transparency. All Directors 
felt they were able to give constructive and valued feedback. 

The actions that arose from the evaluation are: 

Area of focus

Concern

Action

Succession 
planning

Concerns 
regarding talent 
pipeline 

CR Committee Concerns over 
direction of CR 
strategy

New Group Chief Executive and 
Chief Human Resources Ofﬁcer 
developing an updated people 
strategy to be approved by the 
Board and rolled out in 2016

New CR Committee chair, Group 
Chief Executive and Chief Human 
Resources Ofﬁcer developing a  
new strategy to be approved by the 
Committee and rolled out in 2016

Re-election 
In accordance with the Code, all Directors will stand for 
election or re-election at the Annual General Meeting  
(AGM) apart from John McConnell who left the Group  
on 29 February 2016. At the 2015 AGM, shareholders voted  
to elect or re-elect all Directors.

Accountability 
Financial and business reporting 
The Board is responsible for presenting a fair, balanced and 
understandable assessment of the Group’s position and 
prospects. The Board is satisﬁed that appropriate processes 
are in place to enable it to make this statement and to 
provide the necessary information on position and 
performance, business model and strategy to allow users  
to make a fair assessment of the business. A statement  
of the Directors’ responsibilities is set out on page 79. The  
going concern statement is set out on page 79. 

The Board is responsible for establishing and maintaining 
adequate internal controls of regular ﬁnancial reporting for 
the Group, including the consolidation process. Internal 
controls over the ﬁnancial reporting framework are designed 
to provide reasonable assurance regarding the reliability of 
ﬁnancial reporting as well as the preparation of the ﬁnancial 
statements in accordance with IFRS. The Internal Audit team 
regularly assess the effectiveness of internal controls over 
ﬁnancial reporting as well as the preparation of ﬁnancial 
statements based on the framework contained in the Turnball 
guidance and the UK Corporate Governance Code. There 
have been no signiﬁcant changes to the control environment 
and the Board has concluded that the Group’s internal 
system of controls over ﬁnancial reporting was effective  
during the year. Further information on the signiﬁcant  
issues considered by the Audit Committee during the  
year are given on pages 58 to 59. 

Preparation of consolidated accounts 
All data to be consolidated into the Group’s ﬁnancial 
statements is reviewed thoroughly by management to ensure 
that it gives a true and fair reﬂection of the ﬁnancial position 
of the Group. The Group has established the following internal 
controls in relation to the process for preparing consolidated 
ﬁnancial statements: 

•  The Group Finance department, who are responsible for 

producing the consolidated ﬁnancial statements, consists  
of appropriately qualiﬁed individuals. Management  
regularly monitors developments in accounting  
regulations and considers the impact for the  
consolidated ﬁnancial statements.

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CORPORATE GOVERNANCE REPORT CONTINUED

•  For each external reporting period, a set of group reporting 

•  Each business unit is required to implement a rigorous  

instructions are distributed to each market. The local 
ﬁnance teams are required to conﬁrm that they have  
read and understood all instructions.

•  The ﬁnancial statements of each local market are subject 
to a review by a local ﬁnance manager prior to being 
submitted to Group Finance.

•  The Group Finance function will review the submissions of 
each market to look for unusual or unexpected items. Any 
unexplained items are queried with local management. 
The Group’s consolidation, which takes the results of the 
local markets and makes appropriate adjustments, is 
reviewed as appropriate by members of the Group  
Finance team.

•  The draft consolidated ﬁnancial statements are reviewed  
by a qualiﬁed individual independent of the team who 
prepared them.

•  The Audit Committee and the Board review the draft 

consolidated ﬁnancial statements. The Audit Committee 
receives reports from management and the external 
auditor on signiﬁcant judgements and other matters  
of relevance to the ﬁnancial statements.

•  The ﬁnancial statements of all material local markets  

are subject to external audit.

Risk management and internal control
The Board carried out a robust assessment of the principal 
risks facing the Group, including those that would threaten  
its business model, future performance, solvency or liquidity. 
The detailed review behind risk assessment and risk footprint  
is delegated to the Audit Committee and the Group  
Executive Committee. 

The principal risks are built up from a bottom-up review 
overlaid with a top-down view from the Executive and iPOM 
Committees. The Executive Committee identiﬁes the key risks 
and develops mitigation plans for managing those risks. The 
Audit Committee monitors and challenges the outputs. A 
description of those risks, an explanation on how they are 
being managed and mitigated and the Board’s viability 
statement can be found in the Principal Risks report on  
pages 38 to 43. 

The key control processes, described below, enable the 
Directors to review the effectiveness of the risk management 
and internal control systems on an ongoing basis: 

•  Annual Operating Plan (AOP) is reviewed and approved  

by the Board.

•  Monthly actual results are reviewed by management 

against the AOP and, where appropriate, revised forecasts 
are presented to the Board. 

•  Financial information reported to the Board on a monthly 

basis including cash ﬂow, balance sheet and key 
performance indicators.

•  Key business process and controls are reviewed regularly  
by Group Internal Audit and the ﬁndings are reported to  
the Audit Committee at each meeting.

•  Clearly deﬁned authority limits including capital 

expenditure approval procedures.

•  Bank balances are reviewed daily and cash ﬂows 

compared with budgets weekly. 

56

Inchcape Annual Report and Accounts 2015

set of internal controls. From 2016, the Chief Executive and 
Finance Director of each business unit will provide written 
conﬁrmation, twice yearly, that the effectiveness of the 
internal control systems has been reviewed, adhered  
to and remains appropriate.

•  Anti-bribery training is in place in all business units and  

is monitored by the Head of Corporate Assurance. 

Further information on the Group’s Minimum Control 
Framework is given in the Audit Committee Report on page 58.

Audit Committee and the auditor
The Board has delegated certain responsibilities to the  
Audit Committee. The Audit Committee regularly reports  
to the Board to enable the Directors to assess the effectiveness 
of risk management and internal control systems and is also 
responsible for maintaining an appropriate relationship with 
the Company’s auditor. The Audit Committee Report is on 
pages 57 to 60. 

Remuneration 
The Board has delegated remuneration matters to  
the Remuneration Committee. Details of the Company’s 
remuneration policy, how this was implemented during  
the year and the work of the Remuneration Committee  
can be found on pages to 63 to 77. 

Relations with shareholders 
During 2015, the Executive Directors, Chairman and the 
Investor Relations Director met with approximately 200 
institutional investors. The Investor Relations programme 
includes site visits, roadshows and conferences. The Board 
receives details of shareholder opinion surveys on a regular 
basis supplied by an external provider. 

The Chairman also meets external shareholders on an 
ad-hoc basis and the Investor Relations Report which is 
discussed at each Board meeting updates the Directors  
on views of shareholders, along with detailed market 
performance and share price analysis. 

Shareholders are also kept up to date with Company 
performance through regular press releases. These are  
made available to the London Stock Exchange and on  
the Company’s website. Presentations were held for the 
Group’s annual and half yearly results. These presentations  
are published on the Company’s website. The Board is 
provided with regular updates on the views raised by  
the Company’s investors. 

Constructive use of the AGM 
The AGM gives shareholders an opportunity to meet the 
Board and to ask any questions they have regarding the 
Group. The Board encourages participation of private 
shareholders at the AGM, but for those shareholders  
unable to attend in person, a prepaid reply envelope  
is sent to enable them to give their views on any issues  
that may be of concern or interest to them. The Group  
is committed to reducing its impact on the environment  
and has recently contacted shareholders to encourage 
participation in electronic communications to reduce  
paper and printing usage. Shareholders should always 
ensure that they receive communications in the form most 
appropriate for their needs and can change the way they 
receive information at any time. 

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AUDIT COMMITTEE REPORT 

JOHN LANGSTON 

Chair of the Audit Committee 

Dear Shareholder 

During the year, there have been changes to the Committee 
membership and, following the departure of Simon Borrows 
and Vicky Bindra, I am pleased to report that Nigel Northridge 
and Nigel Stein have become members of the Committee. 
Their biographies can be found on pages 50 to 51. 

In addition to the routine business, as detailed in the following 
pages, the Committee also continued its review of the 
Minimum Controls Framework (MCF), which was established 
to raise and continuously improve controls on the integrity  
of the ﬁnancial statements. The Committee conducted a 
detailed review of the implementation of the new framework 
in each market including detailed reviews of ﬁndings of the 
Group Internal Audit team where work was based on the  
new framework. Further details are given on page 58. 

Following the publication of FRS 100, ‘Application of Financial 
Reporting Requirements’ by the Financial Reporting Council, 
the ﬁnancial statements of the parent company, Inchcape 
plc, for the period ended 31 December 2015 have been 
prepared in accordance with Financial Reporting Standard 
101 Reduced Disclosure Framework.

The Committee also reviewed the cyber security 
arrangements and will continue to monitor and assess the 
project during the design and implementation phases to 
ensure that it is appropriate for the Group’s requirements. 

 Key activities in 2015 

•  Review of external ﬁnancial reporting 
•  Consideration of the effectiveness of the external audit 
•  Review of the scope of the Audit Plan
•  Review of the auditor fees 
•  Review of risk management and internal control
•  Assessment of the cyber security plan

Committee membership

John Langston – Chair 

Alison Cooper 

Nigel Northridge (appointed October 2015)*

Nigel Stein (appointed October 2015)*

Meetings attended 

4/4

4/4

0/1

0/1 

* Nigel Northridge and Nigel Stein were unable to attend the Audit 
Committee meeting in November due to prior commitments in 
place before their appointment to the Committee in October. 

The role of the Audit Committee
It is the role of the Audit Committee to ensure the  
integrity of the ﬁnancial reporting and audit processes,  
to ensure sound internal control and risk management 
systems are in place, to review the Group’s whistleblowing 
procedures and to ensure an appropriate relationship  
with the external auditor. 

The terms of reference setting out the authority and 
responsibilities of the Committee can be found on  
the website at www.inchcape.com/governance. 

Composition of the Audit Committee
The Committee members are all independent Non-Executive 
Directors. The Board considers John Langston, Nigel Stein  
and Alison Cooper to have recent and relevant ﬁnancial 
experience. The biographies can be found on pages 50 to 51.

The Chairman, Group Chief Executive, Chief Financial Ofﬁcer 
and Group Audit Director also attend the Committee 
meetings, along with the external auditor. Other senior 
executives, such as the Group Financial Controller and  
Group Tax Director, attend during the year to present to  
the Committee. 

Financial reporting 
During the year, the Committee reviewed the ﬁnal and  
interim results and considered the key audit risks, accounting 
treatment and judgements identiﬁed during the year end 
audit. The Committee discussed with management how the 
accounting policies and judgements had been applied and 
considered the outcomes before recommending approval  
of the results by the Board. In addition to the signiﬁcant issues 
given on pages 58 to 59, the Committee also considered the 
following matters for the year ended 31 December 2015: 

•  recognition of deferred tax assets relating to Russia  

(see note 8 on page 112) 

•  development in the ongoing Franked Investment  

Income Group Litigation Order (see note 29 on page 136)

Further information on ﬁnancial and business reporting  
and the preparation of the consolidated accounts is given  
on pages 55 to 56.

inchcape.com 57

 
 
AUDIT COMMITTEE REPORT CONTINUED

Signiﬁcant issues
The following issues were identiﬁed by the Committee as being signiﬁcant in the context of the ﬁnancial statements or as  
matters of signiﬁcance to the Group and were debated by the Committee during the year. 

Area of focus 

Committee response 

Manufacturers’ bonus   Actions taken in relation to the issue 

Management prepared a detailed review of the total amount of manufacturers’ bonuses received during the full year 
2014, the amount accrued as earned but not yet paid at 31 December 2014 and the amount subsequently received 
during the ﬁrst quarter of 2015. A similar review was prepared for bonuses paid by Inchcape Distribution companies  
to third party retail networks. In both cases, it was demonstrated that the amount accrued at 31 December 2014  
was materially received (or paid) within the ﬁrst quarter of 2015.

Conclusions reached by the Committee 
The Committee concluded that the bonus accruals booked in the 2014 Accounts were objective and accurate  
and that the amounts were materially received during the ﬁrst quarter of 2015. On this basis, and given that there  
have been no material changes to bonus accounting policies, the Committee concluded that it was satisﬁed  
with the 2015 manufacturers’ bonus accruals included within these accounts.

Rationale for the Committee’s conclusion 
The majority of bonus payments are quarterly with limited annual bonuses in place. Typically, incentives are paid  
quarterly based on the delivery of qualifying conditions such as customer metrics or brand presentation, and the  
timing of accruals follows the mechanics of earning the bonus payments once we have reasonable conﬁdence  
of delivery. Where annual bonuses exist, they are mainly non-judgemental and volume-related in nature.

Impairment of goodwill 
(see note 11 to the 
ﬁnancial statements  
on page 115)

Actions taken in relation to the issue 
Management prepared a detailed impairment review of the goodwill in the Group for both the half and full year 
accounts with speciﬁc focus on the business in Russia. The Committee challenged the methodology and sensitivity 
analysis used by management. The Committee also considered the independent review by the external auditor.

Conclusions reached by the Committee
The Committee concluded that the impairment recommended by management was appropriate. The Committee 
concluded that it was appropriate to take a £49.5m non-cash exceptional impairment to write off the full value of 
goodwill in our Russian business. As a result, the Committee concluded that the goodwill carrying amounts shown  
in note 11 on pages 115 to 116 of the ﬁnancial statements were appropriate and it approved the disclosures.

Rationale for the Committee’s conclusion
Given the macro-economic uncertainty in Russia, and despite delivering share gain and improved vehicle margins,  
the Committee concluded that the slower than anticipated market recovery means that the estimated recoverable  
value in Russia at year end no longer supported the goodwill associated with the Russian business.

Pension (see note 5 to 
the ﬁnancial statements 
on page 105) 

Actions taken in relation to the issue
Management, with advice from its actuaries, has updated the year end pension valuations to 31 December. During  
the year, the trustees of the TKM pension scheme concluded a transaction with Aviva whereby the assets of the scheme 
were invested in a bulk purchase annuity contract that matched the liabilities of the scheme (the TKM transaction). The 
Committee reviewed the impact of the changes to assumptions and the buy in transaction on the ﬁnancial statements 
at 31 December 2015.

Minimum Control 
Framework 

Conclusions reached by the Committee 
The Committee concluded that the valuation exercise undertaken by management was appropriate. The Committee 
noted the implications of the TKM transaction in terms of full year investment loss. As a result, the Committee concluded 
that the pension valuations and underlying calculations shown in note 5 on page 106 of the ﬁnancial statements were 
appropriate and it approved the disclosures.

Rationale for the Committee’s conclusion
The Committee reviewed the assumptions used by management and considers them to be reasonable. In addition,  
the external auditor has agreed with management’s treatment of the TKM transaction in the ﬁnancial accounts.

Actions taken in relation to the issue 
During 2013/14, the Company developed the Minimum Control Framework (MCF) to raise and continuously improve  
our controls on the integrity of the ﬁnancial statements and incorporate internal and external best practice. The ﬁrst  
full year of audit against these new higher standards was 2015. The Committee conducted a detailed review of the 
implementation of the new framework in each market including detailed reviews of the ﬁndings of Group Internal  
Audit where work was based on the new framework. The Committee also reviewed in detail the plan and progress  
against the conﬁguration and automation of speciﬁc MCF controls in the iPOWER systems. 

Conclusions reached by the Committee
The Committee concluded that the framework is appropriate for the Group and will provide a consistently high  
and continuously improving control environment.

Rationale for the Committee’s conclusion
The Committee reviewed examples of the new framework in action across a number of complex markets and  
the action plans that have been developed to drive further progress against the new standards.

58

Inchcape Annual Report and Accounts 2015

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Historical reporting issues 
in Chile

Actions taken in relation to the issue
Whilst performing detailed procedures to prepare for the implementation of the global iPOWER system in Chile, 
management discovered some areas of inconsistency in the local accounting system dating back a number  
of years. Management initiated rectiﬁcation activity to both reconcile historic balances and to put in place processes 
and controls to prevent any recurrences of issues during the period until iPOWER is fully implemented. 

Conclusions reached by the Committee
The Committee concluded that the corrections to historic account balances proposed by management were 
appropriate and that these required an immaterial charge to be made against operating expenses in the 2015 
accounts. In addition, the Committee agreed that the structural process and system improvements proposed by 
management were appropriate and will be subject to ongoing review by the Committee. 

Rationale for the Committee’s conclusion 
The Committee reviewed the status and outcomes of the rectiﬁcation work three times during the year, receiving  
a detailed account of the issues encountered and the rectiﬁcation proposed. 

Risk management and internal control 
The Group Audit Director attends every Committee meeting to 
provide an update on the Group’s risk management systems 
and internal controls. The Committee reviews any identiﬁed 
control gaps, monitors progress against mitigation plans  
and assesses the soundness of the control environment.

See page 56 of the Corporate Governance Report for further 
information on the main features of the Group’s internal 
control and risk management systems. The principal risks 
facing the Company and the statement on viability is given 
on pages 40 to 43. The signiﬁcant issues considered by the 
Committee are given in this section of the Annual Report. 

Internal Audit 
The Group Internal Audit Plan (the Plan) is presented to the 
Committee for its review and approval. The Plan sets out the 
audit approach for the year, the allocation of resources and 
the audits to be undertaken, and covers a wide range of 
operational, ﬁnancial and IT processes. Status updates  
and the results of the audits are presented to the Committee 
throughout the year by the Group Audit Director. 

The Committee is also able to meet with the Group Audit 
Director without the presence of the Executive Directors  
to discuss any issues. 

External audit
During the year, the Committee reviewed and approved 
PwC’s audit plan to ensure that it was consistent with the 
scope of the audit engagement and commitments made 
were adhered to. The Committee discussed the risk areas 
identiﬁed by PwC that are most likely to give rise to a material 
ﬁnancial reporting error or those that are perceived to be of a 
higher risk and requiring audit emphasis (including those set 
out in PwC’s Report on pages 140 to 144). The Committee also 
considered the audit scope and materiality and the level of 
non-audit fees.

The Committee considers the reappointment of the external 
auditor and makes its recommendation to the Board for 
approval by shareholders and the AGM. The Committee 
assesses the effectiveness and independence of the auditor  
on an ongoing basis and further details are given below.

Auditor effectiveness
The review of the effectiveness of PwC is based on 
consideration of the results of PwC’s client satisfaction  
survey. Participants include senior ﬁnance personnel in the 
Group’s largest markets together with Group Finance, Tax and 
Company Secretariat. The client satisfaction survey consists of 
a two-page questionnaire in which respondents are asked to 
answer a number of questions about PwC’s service and give 

narrative feedback on how the service can be improved. The 
results of the survey are presented to the Audit Committee at 
the May meeting, with a more detailed assessment on how 
PwC intends to improve on the score provided in the Audit 
Plan, which is presented to the Committee in November  
each year.

The results for the 2014 survey indicated that management 
remain happy with PwC’s knowledge of the business and the 
challenges it faces and also recognised the PwC teams’ hard 
work, professionalism and diligence. There were a few areas 
highlighted for improvement and, as a result, PwC and 
management agreed that the 2015 audit can be improved 
by PwC assessing and testing certain items ahead of the  
year end reporting period. PwC also outlined the professional 
development programme applicable to the partners  
and employees engaged in the audit; have justiﬁed key 
judgements taken during the course of the audit; and 
conﬁrmed that the audit complies with their internal 
independent review procedures. The Committee, after due 
consideration, agreed that the auditor remained effective.

Auditor independence 
During the year, the Committee satisﬁed itself that the auditor 
remained independent. The review included consideration  
of PwC’s conﬁrmation that it remained independent and 
objective within the context of applicable professional 
standards, the rotation of the lead audit partner in line  
with ethical standards and assessment of PwC’s ongoing 
compliance with the Group’s policies on employment of 
former PwC employees and the use of PwC for non-audit 
services. The current audit partner has been in place for  
one year. 

Audit tender 
The Committee agreed to retain PwC as its auditor in 2015 to 
avoid disruption during the Group Chief Executive’s ﬁrst year 
in ofﬁce. During the year, the Committee debated whether to 
put the audit to tender in 2016, but agreed that in light of the 
change of Chief Financial Ofﬁcer and, given the Committee’s 
continued satisfaction with the quality and effectiveness of 
the PwC audit, that it would be prudent to recommend to 
shareholders that PwC be reappointed for a further year. 

The Committee is aware of the relevant EU and UK regulation 
which requires that the audit must be put out to tender at 
least every 10 years and rotated at least every 20 years. PwC 
has been the Group’s auditor for over 20 years and, in light  
of the regulatory requirements, the Committee has agreed 
that it will tender the audit no later than for the audit of the 
December 2020 year end, to align with the maximum 
potential tenure of the current external audit partner. 

inchcape.com 59

 
 
AUDIT COMMITTEE REPORT CONTINUED

NOMINATIONS COMMITTEE REPORT 

Non-audit services 

The Group’s policy for non-services is designed to ensure  
that the external auditor’s objectivity is not compromised by 
earning a disproportionate level of fees for non-audit services 
or by performing work that, by its nature, may compromise the 
auditor’s independence. 

The current policy is to maintain a ratio of 1:0.5 audit to 
non-audit fees and is reviewed twice a year by the Committee 
to ensure that it is being adhered to. The Committee is also 
responsible for authorising the provision of non-audit services 
by the external auditor. Non-audit services supplied by PwC 
include advice on:

•  Tax compliance
•  Accounting advice
•  Cyber security 

The Committee considers the non-audit services on an 
ongoing basis and concluded that, for these services,  
using professional advisors who have a deep understanding 
of the Group’s business is a beneﬁt to the Company. Other 
consultants are used for services where it is considered that  
a conﬂict of interest could exist or where a particular area  
of expertise is required by the Group. A breakdown of the  
fees paid for non-audit services can be found in note 3  
on page 103. 

Under the EU audit regulations noted on page 59, the Group is 
aware that certain services will be prohibited. Therefore, for the 
relevant commencement date for the Group (1 January 2017), 
other ﬁrms will be used to provide tax services. 

Whistleblowing 
We recognise that leveraging the knowledge of our people  
is the most effective way to detect fraudulent activity within 
the business. During 2015, the iPOM Committee implemented 
an externally hosted, conﬁdential, whistleblowing solution to 
supplement and support the existing internal reporting and 
escalation procedures. Operating as an uninterrupted service, 
the ‘InConﬁdence’ compliance and ethics reporting solution 
allows both hotline and web reporting capabilities in multiple 
languages, integrated with case management software to 
support efﬁcient and effective investigation, remediation  
and reporting. 

JOHN LANGSTON 

Chair of the Audit Committee

60

Inchcape Annual Report and Accounts 2015

KEN HANNA

Chair of the Nominations Committee

Dear Shareholder 

As stated in last year’s Report, Stefan Bomhard joined the 
Board in April 2015. The recruitment process started in 2014 
and was ﬁnalised at the beginning of the year when the 
Committee recommended his appointment to the Board  
for approval.

In 2015, both Simon Borrows and Vicky Bindra stepped down 
as Non-Executive Directors of the Company. The Committee 
recommended the appointment of Nigel Stein to the Board 
for approval in October 2015. Nigel is currently Chief Executive 
of GKN plc and he brings a wealth of B2B experience to the 
Board’s deliberations, which will help support the 
achievements of the Group’s strategic objectives. Nigel’s 
biography can be found on page 51. Throughout the 
recruitment process of Nigel Stein, the Committee  
considered diversity when selecting suitable candidates. 

Richard Howes will join as Chief Financial Ofﬁcer on  
11 April 2016 replacing John McConnell who left the  
Group on 29 February 2016. 

In addition to the appointments to the Board, the Committee 
also approved several changes to the Committees. Coline 
McConville will become Remuneration Committee Chair  
from 1 January 2016, Till Vestring become Chair of the CR 
Committee on 8 October 2015 and Nigel Northridge joined 
the Audit Committee from 8 October 2015. Nigel Northridge 
will remain a member of the Remuneration Committee. 

Key activities in 2015
•  Appointment of Stefan Bomhard 
•  Appointment of Nigel Stein
•  Recruitment process for Chief Financial Ofﬁcer 
•  Review and approve Committee membership 

Composition of the Board
The Board consists of the Chairman, two Executive Directors 
and six Non-Executive Directors. All Non-Executive Directors  
are considered independent in accordance with the Code. 

In order to ensure that the composition of the Board remains 
appropriate, the Nominations Committee requires the 
Directors to complete a skills assessment on an annual  
basis. The results of this assessment are used as the basis  
for determining gaps in skills and experience that may  
affect the ability to deliver the Group’s strategic objectives. 

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Committee membership

Meetings attended 

Ken Hanna – Chair 

Alison Cooper 

John Langston 

Coline McConville 

Nigel Northridge 

Nigel Stein (joined October 2015)*

Till Vestring 

2/2

1/2

2/2

2/2

2/2

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2/2

*  Nigel Stein’s appointment took effect after the Nominations 

Committee meeting in October 2015.

The role of the Nominations Committee 
The Nominations Committee plays a vital role within the 
context of the Board as it is responsible for the selection of 
strong candidates to ﬁll both executive and non-executive 
roles. The Committee must keep the skills and experience 
of the Board under review to ensure that the right balance 
is in place for the business to be run effectively. The 
Nominations Committee ensures the right people are 
appointed, the Non-Executive Directors are independent 
and the Directors have sufﬁcient time to carry out their 
duties effectively. 

The terms of reference setting out the authority and 
responsibilities of the Nominations Committee can be 
found on the website www.inchcape.com/governance.

Appointments to the Board 
Succession planning for the Board and Executive Directors is 
a continual process, which is reviewed and evaluated during 
the year to ensure that the skills and experiences required to 
enable the Group to meet its strategic objectives are planned 
in advance to ensure a smooth transition.

Commitment 
It is important to ensure that the Directors have sufﬁcient  
time to carry out their duties effectively. The time commitment 
required by Non-Executive Directors is set out in their Letter of 
Appointment and is reviewed annually by the Nominations 
Committee to ensure that it remains appropriate. 

When vacancies arise it is the role of the Committee to 
prepare an appropriate description of the role and the 
capabilities required. The Committee had identiﬁed the areas 
needed to broaden the skills and experience on the Board 
and used this as a basis for evaluating potential candidates. 
The Committee also has responsibility to ensure that when 
ﬁlling vacancies there is integrity in the appointment process.

Egon Zhender was appointed to assist with the search for  
a Non-Executive Director during the year and prepared a  
list of suitable candidates against the skill set required by the 
Group. The consultants are also required to include a diverse 
selection of candidates in line with the Group’s diversity policy.

Multiple board appointments 
The Committee reviewed its policy on multiple board 
appointments and conﬁrmed that the Directors had 
complied with the policy during the year. 

Election or re-election at the AGM 
Nigel Stein and Richard Howes will stand for election and  
all other Directors will stand for re-election at the AGM.  
The Committee believes that all Directors demonstrate 
commitment to their roles, continue to discharge their  
duties effectively and make an important and valuable 
contribution to the Company. 

The Committee met with suitable candidates, some of  
whom met with other Board members as part of the  
interview process, and after due consideration the  
Committee recommended the appointment of  
Nigel Stein to the Board for approval.

Egon Zehnder does not have any other connection with  
the Company.

John McConnell announced his intention to leave the  
Group in October 2015 and the search for a replacement 
commenced. Spencer Stuart was appointed to assist with  
the recruitment and selection process and does not have  
any other connection with the Group.

The Committee reviewed the shortlist and identiﬁed  
suitable candidates. Following an interview process and  
after due consideration, the Committee recommended the 
appointment of Richard Howes to the Board for approval. 

Independence 
The Committee reviewed the independence of the Non-
Executive Directors in accordance with the Code and agreed 
to recommend to the Board that all Non-Executive Directors 
are considered independent.

Diversity policy 
The Committee recognises the beneﬁts of having a diverse 
Board and sees increasing diversity at Board level as  
an essential element in delivering the Group’s strategic 
objectives. The Company believes that a truly diverse  
Board will include and make good use of differences in skills, 
regional and industry experience as well as background,  
race and gender. These differences will be considered in 
determining optimum composition of the Board and  
where possible should be balanced appropriately. All Board 
appointments are made on merit and in the context of the 
skills and experience needed for the Board to be effective. 

KEN HANNA 

Chair of the Nominations Committee

inchcape.com 61

 
 
Committee membership

Till Vestring – Chair (appointed October 2015)

Stefan Bomhard 

Alison Clarke

Ken Hanna 

Coline McConville 

Meetings attended 

1/1

1/1

1/1

2/2

2/2

The role of the CR Committee 
The CR Committee is responsible for developing a CR 
strategy which underpins the Group’s business operations, 
supports its values and encourages commitment to  
our colleagues, our OEM partners, our customers the 
communities in which we operate and our environment. 

The terms of reference setting out the authority and 
responsibilities of the CR Committee can be found  
on the website www.inchcape.com/governance.

We have continued to collect and monitor our CO2  
data during the year. 

There is still work to be done in this area but we are making 
progress. Our CO2 usage is an important area of focus within 
the Group and we continue to monitor new technologies  
and initiatives to see where we can adopt best practices 
within our businesses. Our greenhouse gas emissions data  
for the year ended 31 December 2015 is given on page 47  
of the CR Report. 

I hope that you ﬁnd the report informative and I am looking 
forward to sharing the progress in our CR journey with you  
in next year’s Annual Report. 

TILL VESTRING 

Chair of the CR Committee

CR COMMITTEE REPORT 

TILL VESTRING 

Chair of the CR Committee

Dear Shareholder 

During the year, the Committee membership changed 
considerably with a new Chief Executive, a new Chief Human 
Resources Ofﬁcer and, following the resignation of Vicky 
Bindra, I became Chairman of the Committee in October. 

As a result of fresh perspective from the new members,  
we have decided to take the opportunity to refresh the 
Group’s CR strategy and policies and have commenced  
this work in 2016. 

The core areas of CR, people, OEM partners, customers, 
communities and the environment will remain but we  
will rethink how our CR activities can support our strategic 
objectives and how we can leverage our global capabilities 
and scale to make a difference to all our stakeholders. 

The CR Report on pages 44 to 47 provides an overview of  
CR activities in 2015 and we have used case studies to 
highlight some of the remarkable achievements by 
colleagues during the year.

The case studies include: the Care Saipan Fund, set up by  
our business Atkins Kroll after Typhoon Soudelour, details  
on page 46; the Big Issue challenge taken on by Inchcape 
Australia senior management, details on page 47; and the 
apprentice programme in Hong Kong which beneﬁts our 
people, our communities and our OEM partners. 

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DIRECTORS’ REPORT ON REMUNERATION

NIGEL NORTHRIDGE 

Chair of the Remuneration Committee

Dear Shareholder 

It is my pleasure to present the Directors’ Report on 
Remuneration for the year ended 31 December 2015.  
This is my last report as Chair of the Remuneration  
Committee and I would like to take this opportunity  
to introduce Coline McConville who has taken up the  
role from 1 January 2016. I am pleased to say that I will  
remain a member of the Committee.

Coline’s ﬁrst task as Remuneration Committee Chair will be  
to review the Group’s current remuneration arrangements  
and the remuneration policy, approved by shareholders in 
2014, to ensure that they remain ﬁt-for-purpose. This review  
will consider any corporate governance developments 
including the strengthening of malus and clawback provisions. 
Shareholders will be consulted throughout the year to ensure 
their views are considered as part of the review process and 
the remuneration policy will be put to vote by shareholders  
at the AGM in 2017.

As set out on page 27 of the Strategic Report, the Group  
has delivered sales of £6.8bn, operating proﬁt before 
exceptional items of £324.7m, EPS of 52.1 (adjusted) and 
ROCE at 30%. As a result of this performance, the normal 
performance share plan (PSP) and co-investment plan  
(CIP) awards vested at 65.5% of maximum. Executive  
Directors received an annual bonus of 85.2% of salary based 
on performance against targets. The Committee also reviewed 
the salary of the Group Chief Executive following his ﬁrst full 
year in the role. Further information is given on pages 71 to 73.

During 2015, the Committee reviewed the number of shares 
granted to participants under the PSP and the performance 
targets for both the PSP and CIP. As the PSP awards are 
granted as a number of shares, the strong share price 
performance by the Group over the last four years has  
seen an increase in £ value of the awards. After review, the 
Committee agreed to reduce the number of shares awarded. 

Committee membership 

Nigel Northridge – Chair

Ken Hanna 

Coline McConville 

Till Vestring 

Meetings attended 

2/2

2/2

2/2

2/2

The role of the Remuneration Committee 
It is the role of the Remuneration Committee to ensure that 
remuneration arrangements support the strategic aims of 
the business and enable the recruitment, motivation and 
retention of senior executives while also complying with  
the requirements of regulation.

The terms of reference setting out the authority and 
responsibilities of the Remuneration Committee can be 
found on the website www.inchcape.com/governance.

The Committee invites other individuals, such as the Group 
Chief Executive, the Chief Human Resources Ofﬁcer and 
external consultants to attend its meetings. No Director 
takes part in any decision affecting his own remuneration.

The Committee determined that the EPS growth targets in 
respect of the normal and enhanced PSP awards remained 
appropriately stretching and approved an increase to the 
ROCE targets in respect of the normal PSP and CIP awards 
from 21% to 25%. 

Further details on the PSP and CIP awards granted during  
the year are given on page 74. 

Chief Financial Ofﬁcer
John McConnell left the Group on 29 February 2016 and will 
be replaced by Richard Howes as Chief Financial Ofﬁcer on  
11 April 2016. 

As agreed by the Committee during the year, and in line with 
our remuneration policy, John will receive a payment in lieu of 
notice which equates to six months’ base salary and beneﬁts. 
The treatment of his outstanding incentives is in line with his 
good leaver status and outstanding contribution over the  
last 16 years. Further details are provided on page 77.

Richard will receive a salary of £405,000, incentives in line with 
our remuneration policy, and standard beneﬁts commensurate 
with this position including a pension allowance of 30% of 
salary. Further details are given on page 71. 

Key activities in 2015
Other activities carried out by the Committee include:

•  Agreed the remuneration package for Executive Directors
•  Reviewed the remuneration package for Executive 

Committee members

•  Approved the achievement of 2014 annual bonus and 2012 

long-term incentive targets and the resulting outcomes

•  Set the performance targets for 2015 annual bonus

NIGEL NORTHRIDGE

Chairman of the Remuneration Committee

inchcape.com 63

 
 
DIRECTORS’ REPORT ON REMUNERATION CONTINUED

Part 1 – Directors’ Remuneration Policy
This section of the Report sets out the policy that 
shareholders approved at the 2014 AGM. The Policy came 
into effect on 16 May 2014 and will be in place for three 
years before the next vote.

Policy objectives
•  Align with and support the Group’s business strategy;
•  Enable the Company to attract, retain and motivate 

management;

•  Encourage the right behaviours, drive performance and 
reward results by delivering upper quartile pay for upper 
quartile performance; and

•  Align executive management and shareholders’ interests. 

The Committee considers performance on environmental, 
social and governance issues when setting the 
remuneration policy and believes that the policy  
does not raise risks in these areas by motivating 
irresponsible behaviour.

Remuneration Policy for Executive Directors

Element 

Objective and link to strategy

Operation and performance metrics 

Opportunity 

Base Salary 

To pay competitive salary,  
to attract, retain and  
motivate talent. 

Annual Bonus

To motivate outstanding 
performance; speciﬁcally, to 
reward sustainable growth in 
proﬁts, i.e. growth that comes 
from the top line as well as 
from improving margins, and 
to maintain exceptional levels 
of customer service.

Performance 
Share Plan 
(PSP)

To provide a meaningful 
reward to senior executives 
linked to the long-term 
success of the business.

The mix of ‘normal’ and 
‘enhanced’ performance 
shares enables the delivery  
of median pay for median 
performance, upper quartile 
pay for upper quartile 
performance and upper 
decile pay for upper  
decile performance.

To strengthen alignment  
with shareholders by deﬁning 
award sizes as a number  
of shares.

Increases are not expected to  
exceed average increase for senior 
management, unless a change in 
scope or complexity of role applies.

Salaries are reviewed annually and any increases 
typically take effect from 1 April of each year.

Adjustments to salary will take account of:

•  Increases awarded across the Group as a  

whole, and conditions elsewhere in the Group;

•  Experience and performance of the individual;

•  Pay levels at organisations of a similar size, 

complexity and type; and

•  Changes in responsibilities or scope of the role.

Based at least 70% on annual ﬁnancial 
performance. Measures may include (but are  
not limited to) revenue and operating proﬁt.

150% of salary maximum payable  
for achieving stretch performance 
against all measures.

Any annual bonus earned above 100% of salary  
is paid in shares which are automatically invested  
in the co-investment plan.

The bonus is reduced if Net Promoter Score  
(NPS) falls below target levels of performance.

The Committee retains discretion to adjust the 
bonus outcome up or down to ensure that it is a fair 
reﬂection of the Group’s underlying performance.

Annual awards of ‘normal’ performance shares, 
vesting based on three-year EPS growth and 
three-year average ROCE performance.

The performance measures may vary year-on-year 
to reﬂect strategic priorities, subject to a minimum  
of 50% based on EPS growth, but allowing for the 
potential introduction of a third measure to facilitate 
continued alignment with the Company’s strategy.

Annual awards of ‘enhanced’ performance shares, 
vesting on stretch EPS targets, over and above those 
attached to ‘normal’ performance shares.

Any dividends paid would accrue over the vesting 
period and would be paid only on those shares 
that vest.

The Committee has discretion to reduce or prevent 
vesting in the event of material restatement of the 
Group ﬁnancial statements or gross misconduct.

The Committee also has discretion to adjust  
the performance conditions in exceptional 
circumstances, provided the new conditions are  
no tougher or easier than the original conditions.

60% of salary payable for target 
performance.

12% of salary payable for entry  
level performance.

Award levels are expressed as  
a number of shares, subject to  
an individual limit of 300% of  
salary in normal circumstances.

However, the Committee will review 
award sizes prior to each grant to 
ensure that they are appropriate  
in light of market data and 
individual and Group performance.

Threshold level performance will  
result in 25% vesting of the ‘normal’ 
shares and no vesting of the 
‘enhanced’ shares.

The Committee has discretion to  
make higher awards in exceptional 
circumstances. Any such award  
would be capped at 150% of salary.

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Remuneration Policy for Executive Directors continued

Element 

Objective and link to strategy

Operation and performance metrics 

Opportunity 

Co-investment 
Plan (CIP)

To encourage executive share 
ownership and reinforce  
long-term success.

Save As  
You Earn (SAYE)

To encourage share 
ownership.

A voluntary investment opportunity in return for  
a performance based match.

Any bonus over 100% of salary will be paid in shares 
which will be automatically invested in the plan. 
Further voluntary investments may be made  
up to the investment limit.

Invested shares can be withdrawn at any time  
but the entitlement to a match would be lost if the 
invested shares are withdrawn before the end of  
the relevant three-year vesting period.

Vesting of match awards based on three-year EPS 
growth and three-year average ROCE performance.

The performance measures may vary year-on-year 
to reﬂect strategic priorities, subject to minimum of 
50% to be based on EPS growth but allowing for the 
potential introduction of a third measure to facilitate 
continued alignment with the Company’s strategy.

Any dividends paid would accrue over the vesting 
period and would be paid only on those shares 
that vest.

The Committee also has the discretion to adjust  
the performance conditions in exceptional 
circumstances, provided the new conditions are  
no tougher or easier than the original conditions.

UK employees are able to make monthly savings, 
over a three-year period. At the end of the savings 
period, the funds are used to purchase shares 
under option.

As this is an all-employee scheme and Executive 
Directors participate on the same terms as other 
employees, the acquisition of shares is not subject 
to the satisfaction of a performance target.

Pension

To provide market competitive 
pension beneﬁts where it is 
cost effective and tax efﬁcient 
to do so.

The Group’s pension scheme, Cash+, is a career 
average cash retirement scheme which accrues 
16% of earnings (capped at £250,000 p.a. paid  
as a lump sum at the age of 65).

Other beneﬁts

To provide market competitive 
beneﬁts where it is cost 
effective and tax efﬁcient  
to do so.

Members are required to contribute 7%  
of pensionable salary.

Executive Directors may also receive a salary 
supplement in lieu of pension contributions.

Salary is the only element of remuneration that 
is pensionable.

Beneﬁts currently include (but are not limited to):

•  Company cars;

•  Medical care; and

•  Life assurance premiums.

All beneﬁts are non-pensionable.

Executive Directors may invest up to  
an overall normal maximum of 50%  
of post-tax salary.

Maximum match of 2:1, threshold  
of 0.5:1.

Maximum normal matching award  
is therefore 100% of salary in any 
year, and threshold matching 
award is 25% of salary.

In exceptional circumstances  
the Committee may increase the 
investment opportunity up to 100%  
of post-tax salary.

Participation limits are those set  
by the UK tax authorities from time  
to time.

Eligibility to join the Cash+ scheme  
at a minimum level to meet  
regulatory requirements.

Cash supplement up to 40%  
of base salary.

It is not anticipated that the costs  
of beneﬁts provided will materially 
exceed 5% of salary for existing 
Executive Directors.

The Committee retains the 
discretion to approve a higher cost 
in exceptional circumstances (e.g. 
relocation, which has been paid  
to the new Group Chief Executive).

To encourage share ownership and ensure alignment of executive interests with those of shareholders, Executive Directors are 
required to hold a ﬁxed number of shares equivalent to 200% of base salary. Executive Directors have ﬁve years from the date  
of appointment to reach this shareholding.

inchcape.com 65

 
 
DIRECTORS’ REPORT ON REMUNERATION CONTINUED

Notes to the Policy 

Payments from existing awards

Executive Directors are eligible to receive payment from any 
award made prior to the approval and implementation of  
the remuneration policy detailed in this report. Such awards 
include vested but unexercised options.

Selection of performance measures & target setting

The annual bonus measures have been selected to 
incentivise sustainable growth in proﬁts. The matrix structure is 
intended to provide a balanced focus between commercial 
and cash initiatives. NPS is selected to reinforce the Group’s 
Customer strategy and maintain exceptional levels of 
customer service.

The Committee believes that EPS is the best measure  
of long-term performance for the Group and is currently 
therefore the primary long-term incentive measure. It provides 
strong line of sight for executives, who are familiar with  
the existing basis of EPS performance measurement, and  
is consistent with the Group’s long-term strategy focusing  
on sustainable growth. ROCE supports the Group’s cash 
initiatives of controlling working capital and capital 
expenditure and, when combined with EPS, provides a 
balance between growth and returns. The Committee  
will be reviewing these performance measures in 2016  
as part of its review of remuneration arrangements to  
ensure that the most appropriate measures are used  
in ongoing incentive arrangements.

Performance targets are set to be stretching and achievable, 
taking into account the Company’s strategic priorities and  
the economic environment in which the Company operates.

Targets are set taking into account a range of reference 
points including the Group’s strategic plan and broker 
forecasts for both the Group and other sector peers. The 
Committee believes that the performance targets set are  
very stretching, and that the maximum will only be achievable 
for truly outstanding performance.

Changes to policy in the current year

There have been no changes to the policy during the year. 
The Committee is however undertaking a review of the policy 
in 2016. The policy will be submitted for shareholder approval 
at the 2017 AGM.

Remuneration Policy for other employees

Our approach to salary reviews is consistent across the  
Group with consideration given to the level of responsibility, 
experience, individual performance, salary levels in 
comparable companies (using remuneration surveys,  
where appropriate) and the Company’s ability to pay.

Senior managers participate in an annual bonus scheme 
which has similar performance targets to those of the 
Executive Directors. Below this level, local incentive schemes 
are in place for management and non-management 
employees. Opportunities and performance conditions  
vary by organisational level, with business unit speciﬁc  
metrics incorporated where appropriate. Commission  
based arrangements are also operated for certain roles.

Senior managers (c. 300 individuals) also receive ‘normal’ PSP 
awards, while ‘enhanced’ PSP awards and participation in the 
CIP are limited to Executive Directors, Executive Committee 
members and the next level of executives (c. 25 individuals). 
Performance conditions are consistent for all participants 
while award sizes vary by organisational level. Share 
ownership guidelines apply to Executive Directors.

All UK employees are eligible to participate in the SAYE 
scheme on the same terms.

Pension and beneﬁts arrangements are tailored to local 
market conditions, and so various arrangements are in place 
for different populations within the Group. Executive Directors 
participate in the same scheme as other senior executives.

Remuneration Policy for Non-Executive Directors

Objective and link to strategy 

Operation and performance metrics

Opportunity 

To provide fair remuneration, 
reﬂecting the time commitment 
and responsibilities of the roles.

Non-Executive Directors receive a ﬁxed fee and do not 
participate in any incentive schemes or receive any  
other beneﬁts, except the Chairman who receives 
medical cover.

Fee levels are reviewed regularly, with any adjustments 
effective immediately after the review is approved.

Additional fees are payable for acting as Senior 
Independent Director and as Chairman of any  
of the Board’s Committees (excluding the  
Nominations Committee).

The Chairman’s fee is determined by the Remuneration 
Committee and the fees for other Non-Executive Directors  
are determined by the Executive Directors.

Non-Executive Directors may elect to receive up  
to 20% of their net fees p.a. as Company shares. 

Appropriate adjustments may be made  
to fee levels, taking account of:

•  increases awarded across the Group  
as a whole and conditions elsewhere  
in the Group;

•  fee levels at organisations of a similar  

size, complexity and type; and

•  changes in complexity, responsibility or 
time commitment required for the role. 

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3,000

John McConnell – Group Finance Director

Salary pension and beneﬁts
Annual bonus
Long-term incentives (CIP and PSP)

Consideration of conditions elsewhere in  
the Group
Prior to the annual salary review, the Committee receives  
an update from the Chief Human Resources Ofﬁcer on the 
average salary increases across the Group. This is considered 
by the Committee when determining salary increases for  
the Executive Directors and the Executive Committee. The 
Company has a diverse international spread of businesses  
as well as a wide variety of roles from petrol pump attendants 
and valeters through to Chief Executives of our individual 
businesses, therefore pay levels and structures vary to reﬂect 
local market conditions. Although the Company has not 
£2,548
carried out a formal employee consultation regarding Board 
50%
remuneration, it does comply with local regulations and 
practices regarding employee consultation more broadly.

)
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0
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(
n
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1,800

2,400

i
t

Consideration of shareholder views
When determining remuneration, the Committee takes  
into account the guidelines of investor bodies and 
shareholder views.

The Committee is always open to feedback from shareholders 
on remuneration policy and arrangements. We commit to 
undertaking shareholder consultation in advance of any 
changes to remuneration policy. The Committee will continue 
to monitor trends and developments in corporate 
governance and market practice to ensure the structure  
of the executive remuneration remains appropriate. The  
votes received on the 2014 Directors’ Report on Remuneration 
and the Remuneration Policy at the 2014 AGM are provided 
on page 77.

a
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1,200

60%

600

Performance scenarios
The charts below show the remuneration that Executive Directors could be expected to obtain based on varying 
26.1%
performance scenarios. Illustrations are intended to provide further information to shareholders regarding the pay for 
23.9%
performance relationship. However, actual pay delivered will be inﬂuenced by changes in share price and the vesting 
periods of awards. The Group Chief Executive chart has been updated for his 2016 salary and 2016 long-term incentive 
grant. The Chief Financial Ofﬁcer data relates to Richard Howes, who will join the Group on 11 April 2016.

22.7%

51.9%

25.4%

100%

£443

0

Minimum On-target Maximum

Stefan Bomhard – Group Chief Executive

Richard Howes – Chief Financial Ofﬁcer

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4,000

3,200

2,400

1,600

800

0

Salary pension and beneﬁts
Annual bonus
Long-term incentives (CIP and PSP)

£3,907

49%

£1,800

25%

27%

£928

100%

23%

52%

24%

Minimum On-target Maximum

)
s
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(
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i
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4,000

3,200

2,400

1,600

800

0

Salary pension and beneﬁts
Annual bonus
Long-term incentives (CIP and PSP)

£2,370

51%

£1,074

26%

23%

51%

26%

23%

£547

100%

Minimum On-target Maximum

Notes on the performance scenarios:

•  Potential reward opportunities illustrated above are based on the policy which will apply for the forthcoming ﬁnancial year.
•  Base salary – base salary effective from 1 April 2016.
•  Annual bonus – the amounts illustrated are those potentially receivable in respect of performance for 2016.
•  PSP values are based on the expected number of shares to be awarded in 2016 and average share price from  

1 October 2015 to 31 December 2015 of 769.7p.

•  CIP values assume full voluntary investments in Inchcape shares.
•  Projected values exclude the impact of share price movements and dividend accrual. Awards in lieu of forfeited  

incentives have also been included.

•  The minimum scenario shows base salary, pension and beneﬁts (i.e. ﬁxed remuneration), excluding the one-off  
relocation allowance, which are the only elements of the Executive Directors’ remuneration which are not at risk.

•  The on-target scenario reﬂects ﬁxed remuneration, plus a target payout of 40% of the annual bonus, threshold vesting  

of 25% of the normal PSP award and 0% vesting of the enhanced PSP award and threshold match of 0.5:1 under the CIP.

•  The maximum scenario reﬂects ﬁxed remuneration, plus full payout of all incentives.

inchcape.com 67

 
 
 
 
 
 
 
 
DIRECTORS’ REPORT ON REMUNERATION CONTINUED

Approach to recruitment remuneration
External appointments
When appointing a new Executive Director, the Committee may make use of any of the existing components of remuneration,  
as follows:

Component

Base salary

Pension

Beneﬁts 

Annual bonus

PSP

CIP

Other

Approach 

Maximum annual grant value 

The base salaries of new appointees will be determined  
by reference to the scope of the role, experience of the 
individual, pay levels at organisations of a similar size, 
complexity and type, pay and conditions elsewhere in  
the Group, implications for total remuneration, internal 
relativities and the candidate’s current base salary.

New appointees will be eligible to participate in the  
Group’s pension plan (or receive a cash supplement  
in lieu) on similar terms to existing Executive Directors. 

New appointees will be eligible to receive normal beneﬁts 
available to senior management, including (but not limited  
to) company cars, medical care and life assurance. 

n/a

n/a

n/a

The annual bonus described in the policy table will  
apply to new appointees with the relevant maximum  
being pro-rated to reﬂect the proportion of employment  
over the year. 

150% of salary 

New appointees will be granted awards on the same terms 
as other Executive Directors as described in the policy table.

New appointees will be granted awards on the same terms 
as other Executive Directors as described in the policy table.

New appointees will be required to be eligible for a bonus 
before they can participate in the CIP.

300% of salary in  
normal circumstances,  
or higher in exceptional 
circumstances.

100% of salary in  
normal circumstances,  
or 200% of salary  
in exceptional 
circumstances.

The combined 
maximum  
is not intended  
to exceed  
400% of salary  
in normal 
circumstances.

Any buy-out of incentives forfeited on leaving a previous 
employer will be structured on a comparable basis, taking 
into account any performance conditions attached,  
time to vesting and share price at the time of buy-out.

n/a

The Committee retains discretion to make use of the  
relevant Listing Rule to facilitate such a buy-out. 

Non-Executive Directors

In recruiting a new Non-Executive Director, the Committee will 
use the policy as set out in the table on page 66. A base fee  
in line with the prevailing fee schedule would be payable for 
Board membership, with additional fees payable for acting  
as Senior Independent Director or as the Chairman of Audit, 
Remuneration and CR Committees as appropriate.

Notes to recruitment remuneration policy
In determining the appropriate remuneration for a new 
Executive Director, the Committee will take into consideration 
all relevant factors to ensure that arrangements are in the 
best interests of the Group and its shareholders.

Internal appointments

In cases of internal promotions to the Board, the Committee 
will determine remuneration in line with the policy for external 
appointees as detailed above. Where an individual has 
contractual commitments made prior to their promotion  
to Executive Director level, the Company will continue to 
honour these arrangements. Incentive opportunities for  
below Board level employees are typically no higher than  
for Executive Directors, but measures may vary to provide 
better line of sight.

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Exit payment policy, service contracts and change of control
The Company’s policy is to limit severance payments on termination to pre-established contractual arrangements.

In addition, the Company retains discretion to settle any other amount reasonably due to the Executive Director, for example to 
meet legal fees incurred by the Executive Director in connection with the termination of employment, where the Company wishes 
to enter into a settlement agreement and the individual must seek independent legal advice. In the event that the employment 
of an Executive Director is terminated, any compensation payable will be determined in accordance with the terms of the service 
contract between the Company and the employee as well as the rules of any incentive plans. When considering exit payments, 
the Committee reviews all potential incentive outcomes to ensure they are fair to both shareholders and participants.

The table below summarises how the awards under the annual bonus, PSP and CIP are typically treated in speciﬁc 
circumstances, with the ﬁnal treatment remaining subject to the Committee’s discretion:

Component

Circumstance

Treatment

Annual Bonus

Resignation. 

Bonus will lapse unless the date of leaving is 
after the year end. The bonus will only be paid  
to the extent the targets set at the beginning  
of the year have been achieved.

Payment/vesting date

Either the end of the  
performance period or at  
the Committee’s discretion. 

Death, ill-health, redundancy, 
retirement or any other reason 
which the Committee may,  
in its absolute discretion, permit.

The bonus will only be paid to the extent  
the targets set at the beginning of the  
year have been achieved.

Either the end of the  
performance period or at  
the Committee’s discretion.

Any bonus payment will be pro-rated  
for time served during the year.

Change of control. 

The bonus will only be paid to the extent  
the targets set at the beginning of the year  
have been achieved.

Either the end of the  
performance period or at  
the Committee’s discretion.

PSP and CIP

Resignation. 

Death, ill-health, redundancy, 
retirement (CIP only) or any 
other reason which the 
Committee may, in its  
absolute discretion, permit.

Change of control. 

Any bonus payment will be pro-rated  
for time served during the year.

Unvested awards will lapse on date  
of leaving. Any vested awards can  
be exercised.

Any unvested awards will be pro-rated  
for time and performance. 

Either the end of the  
performance period or at  
the Committee’s discretion.

Either the end of the  
performance period or at  
the Committee’s discretion.

Any unvested awards will be pro-rated  
for time and performance.

Either the end of the  
performance period or at  
the Committee’s discretion.

Service contracts
The Company’s policy is for Executive Directors’ service contract notice periods to be no longer than 12 months, except  
in exceptional circumstances. All current contracts contain notice periods of 12 months.

Name

Stefan Bomhard

Richard Howes

Date of contract

1 April 2015

11 April 2016

Notice period

12 months

12 months 

Unexpired term 

To retirement age

To retirement age

The Company may terminate an Executive Director’s contract by paying a sum equal to base salary and, in certain 
circumstances, beneﬁts including pension and life assurance, company car and entitlement to holiday pay for the  
12-month period. Executive Directors’ service contracts are available to view at the Company’s registered ofﬁce.

inchcape.com 69

 
 
DIRECTORS’ REPORT ON REMUNERATION CONTINUED

Part 2 – Annual Report on Remuneration
The names of the Committee members are given on page 
63 and their biographies can be found on page 50. The 
work of the Committee during the year is summarised  
in the letter to shareholders on page 63 and given in  
full detail in the following report.

The Committee considers the UK Corporate Governance 
Code requirements regarding remuneration in relation to 
the Group’s risk policies. The Committee is satisﬁed that the 
approach to setting the remuneration of the Executive 
Directors and the Executive Committee underpins the 
effective and proper management of risk by rewarding  
fairly for sustainable proﬁt growth and long-term returns  
for shareholders. The following section provides details of 
how the Company’s remuneration policy was implemented 
during the ﬁnancial year to 31 December 2015 and how it will 
be implemented in the ﬁnancial year to 31 December 2016. 

Single total ﬁgure of remuneration (audited)
The table below sets out the total remuneration received by the Directors for the year ended 31 December 2015:

Base  
salary/fees
£’000

Taxable  
beneﬁts (a)
£’000

Pension (b)
£’000

Single-year  
variable (c)
£’000

Multiple-year  
variable (d)
£’000

Other (e)
£’000

Total
£’000

2015

2014

2015

2014

2015

2014

2015

2014 

2015

2014

2015

2014

2015

2014

Executive Directors 

Stefan Bomhard*

André Lacroix* 

John McConnell 

Non-Executive Directors (f) 

Ken Hanna 

Vicky Bindra* 

Simon Borrows*

Alison Cooper 

John Langston 

Coline McConville

Nigel Northridge 

Nigel Stein* 

Till Vestring 

Total

488

206

441

–

822

433

302

300

50

32

55

66

55

72

13

56

65

76

55

65

32

65

–

55

214

5

3

3

–

–

–

–

–

–

–

–

–

18

8

146

83

155

415

–

–

1,240

–

–

378

652

681

329

153

3

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

1,643

3,216

1,919

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

1,836

1,968

225

29

384

482

793

1,892

681

5,135

1,643

–

–

2

–

–

–

–

–

–

–

–

–

2

2,906

294

1,658

–

5,625

3,167

305

303

50

32

55

66

55

72

13

56

65

76

55

65

32

65

–

55

5,562

9,508

*    Stefan Bomhard and Nigel Stein joined the Group during the year. André Lacroix, Vicky Bindra and Simon Borrows left the Group during the year. 
(a)  Taxable beneﬁts comprise car allowance, medical cover and mileage allowance. A relocation allowance was paid to Stefan Bomhard to  

assist with his move to the UK. Payment will end in March 2016.

(b)  During the year, Stefan Bomhard and John McConnell received a cash supplement of 30% of base salary and André Lacroix received  

a cash supplement of 40% of base salary, in lieu of pension contributions.

(c) Payment for performance during the year under the annual bonus, including amounts paid in shares. 
(d)  The 2015 ﬁgure includes PSP and CIP based on the value at vesting, of shares vesting on performance over the three-year period ended  

31 December 2015, based on the average share price from 1 October 2015 to 31 December 2015 of 769.7p. Awards granted in 2012, which 
vested on performance to 31 December 2014, are valued using the market price at the date of vesting of 843.5p for PSP and 855.0p for CIP.  
These amounts have been revised from last year’s report to reﬂect the share price on the date of vesting and include dividend equivalent shares.
(e)  The ﬁgure for Stefan Bomhard represents the value of the award in lieu of forfeited incentives from his previous employer, see page 74 for further 

details and SAYE based on the embedded value at grant.

(f)  The fees of the Chairman, Non-Executive Directors and the Senior Independent Director are given on page 71. 

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Base salary
Salaries are reviewed annually and typically take effect from 1 April each year. The quantum of executive total remuneration was 
reviewed against four comparator groups: retailers, distributors, companies of a similar market cap, and companies with similar 
revenues. Salaries for 2016 were determined taking into account this benchmarking data, as well as the other factors detailed  
in the policy table. 

The salaries for 2014, 2015 and 2016 are set out below, together with the average increases across the Group.

Name

Stefan Bomhard 

Richard Howes

Average increase across Group 

1 April 2014

n/a

n/a

2.9%

1 April 2015

£650,000

n/a

2.1% 

1 April 2016

£700,000 – 7.6% increase

£405,000

3.4%

The Committee considered carefully the salary positioning of Stefan Bomhard, who joined the Company on a base salary  
that was c. 20% below that of the previous Group Chief Executive. It is the view of the Committee that Stefan has had a very 
successful year and, as such, the Committee feels it is appropriate to increase his salary by 7.6%. This increase is within the  
range of increases offered to other employees and moves his total package closer (albeit not all the way) to median. 

The salary increase will not affect the number of PSP shares granted in 2016 which, consistent with our policy, is currently ﬁxed  
at 159,705 shares. 

Chairman’s and Non-Executive Directors’ fees
The Chairman and Non-Executive Directors’ fees were reviewed in 2015. The Chairman’s fee was increased from £300,000 to 
£320,000 p.a. and the Non-Executive Directors’ fees were increased from £55,000 to £60,000 p.a. An additional £15,000 p.a.  
is payable for the Chairmanship of the Remuneration and Audit Committees. The Chairman of the CR Committee receives  
an additional £10,000 p.a. The fee for the Senior Independent Director was increased from £76,000 to £81,000 p.a. 

All changes were with effect from 1 December 2015. 

The Non-Executive Directors’ fees are reviewed on a regular basis to ensure that they remain appropriate.

Pension
During the year, the Executive Directors received a cash supplement of 30% of base salary in lieu of pension contributions,  
and were eligible to join the Cash+ scheme. For 2016, this arrangement remains unchanged for Stefan Bomhard, and for  
John McConnell until his departure date. Richard Howes, the new Chief Financial Ofﬁcer, will receive a cash supplement  
of 30% of base salary in lieu of pension contribution and will be eligible to join the Cash+ scheme.

On 31 December 2012, the Group closed the UK ﬁnal salary pension plan to future accrual. Under the scheme, the Group  
offered deﬁned beneﬁt pensions for Executive Directors and other senior executives at the normal retirement age of 65.

Director’s pension entitlements – John McConnell (audited) 

Increase in 
accrued DB 
pension during 
the year  
£’000

Increase in 
accrued DB pension 
during the year 
(net of inﬂation)
£’000

Accumulated  
total of accrued  
DB pension  
at 31.12.14 
£’000

Accumulated  
total of accrued 
DB pension 
at 31.12.15  
£’000 

Pension Value  
in Year 
 £’000

Group pension

0.2

0

15.3

15.5

0

Increase in 
accrued  
lump sum  
during the year  

£’000

41.5

Increase in 
accrued lump sum 
during the year 
(net of inﬂation)
£’000

Accumulated  
total of accrued 
lump sum  
at 31.12.14 
£’000

Accumulated  
total of accrued 
lump sum  
at 31.12.15  
£’000 

Pension Value 
in Year 
 £’000

22.9

90.3

131.8

n/a

Cash+

John McConnell made a contribution to his pension of 7% of capped salary via salary sacriﬁce. 

Cash  
Supplement  

£’000

n/a

Cash  
Supplement  

£’000

132.3

Total  
£’000

n/a

Total  
£’000

155.2

inchcape.com 71

 
 
DIRECTORS’ REPORT ON REMUNERATION CONTINUED

Annual bonus
In line with the Committee’s commitment to disclose bonus targets, the tables below illustrate targets, performance and  
resulting bonus outcome for the Executive Directors (at the time) for the 2013, 2014 and 2015 bonuses. Further detail on  
the 2015 bonus performance matrix can be found in the 2014 Annual Report on Remuneration. 

Executive Directors’ annual bonuses are assessed against a ﬁnancial performance matrix of revenue and operating proﬁt  
targets and an NPS multiplier. This matrix is designed to reward stretching ﬁnancial performance, while maintaining exceptional 
customer service. NPS is the Group’s primary measure of customer satisfaction, used to gauge the strength and loyalty of  
our customer relationships. The annual bonus is reduced if NPS falls below benchmark but is not increased for achieving  
or beating benchmark. The benchmark is established each year based on the Board’s assessment of what constitutes 
excellence in customer service.

The tables below illustrate performance against the bonus targets for 2015, 2014 and 2013.

2015 bonus

Performance measure

Revenue

Operating Proﬁt

NPS targets

2014 bonus

Performance measure

Revenue

Operating Proﬁt

NPS targets

2013 bonus 

Performance measure

Revenue

Operating Proﬁt

NPS targets

Threshold

£6,445.8m

£296.2m

Performance targets

Target

£6,785.1m

£329.1m

Benchmark

Threshold

£6,184.5m

£264.6m

Performance targets

Target

£6,510.0m

£294.0m

Benchmark

Threshold

£5,875.8m

£250.2m

Performance targets

Target

£6,185.0m

£278.0m

Benchmark

Stretch

£7,124.4m

£362.0m

Stretch

£6,835.5m

£323.4m

Stretch

£6,494.3

£305.8m

Actual performance 
achieved 1 

% of maximum 
opportunity achieved 

Bonus payout 
(as % of salary)

£7,012.7m

£331.8m

Targets met in full

56.8%

85.2%

Actual performance 
achieved 1 

% of maximum 
opportunity achieved 

Bonus payout 
(as % of salary)

£6,947.3m

£329.5m

Targets met in full

100%

150%

Actual performance 
achieved 1

% of maximum 
opportunity achieved 

Bonus payout 
(as % of salary)

£6,250.7m

£280.7m

Targets met in full

48.4%

72.6%

1.  Actual performance for determining bonus outcomes has been calculated using the same currency rates as used to set the bonus targets. 

This ensures that bonus outcomes are linked to, and reward for, underlying ﬁnancial performance.

Annual Bonus for 2016
The maximum annual bonus opportunity in 2016 will remain unchanged from previous years and will be 150% of salary. The 
bonus for the new Chief Financial Ofﬁcer will be pro-rated to reﬂect the proportion of the year served. 

The bonus for the Executive Directors will be based on the same ﬁnancial performance matrix, linked to revenue and operating 
proﬁt, and customer service. The Committee intends to publish the ﬁnancial targets for the 2016 bonus in next year’s Directors’ 

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Report on Remuneration. 

Awards vesting during the year
In 2013, the Executive Directors were granted awards under the PSP and CIP schemes. Vesting is dependent on certain 
performance targets over the three years to 31 December 2015. There was no retest provision. Performance against targets  
and vesting schedules is as follows:

Normal PSP/CIP
Three-year EPS growth p.a.

Less than 7%

7%

15%

Between 7% and 15%

Three-year average ROCE

Less than 18%

18%

21%

Between 18% and 21%

Enhanced PSP
Three-year EPS growth p.a.

Less than 15%

20%

Between 15% and 20%

Award

Normal PSP

Enhanced PSP

Total (overall vesting outcome of normal PSP)

Award

CIP

Total (overall vesting outcome)

Vesting %

0%

25%

100%

Straight line basis

Vesting %

0%

25%

100%

Straight line basis

Vesting %

0%

100%

Straight line basis

Performance Measure

EPS

ROCE

EPS

Performance Measure

EPS

ROCE

Wtg.

75%

25%

100%

Wtg.

75%

25%

Vesting outcome (% of element)

54%

100%

0%

65.5%

Vesting outcome (% of element)

1.11:1 match

2:1 match

1.31:1 match

As the market price on the date of vesting is unknown at the time of reporting, the value is estimated using the average  
market value of the last three months of 2015, which is 769.7p. The actual value at vesting will be given in the 2016 Directors’ 
Report on Remuneration.

John McConnell

Normal PSP

Enhanced PSP

CIP

Interest  
held

Vesting  

%

Interest  
vesting

Vesting  
date

Assumed  

market price (p)

Estimated  

value

130,760

26,150

4,271

65.5%

0%

65.5%

85,647

11 April 2016

0

11 April 2016

2,797

23 April 2016

769.7

769.7

769.7

£659,225

£0

£21,529

inchcape.com 73

 
 
DIRECTORS’ REPORT ON REMUNERATION CONTINUED

Awards made during the year
The PSP awards were granted as a number of shares because the Committee feels this provides a strong alignment with 
shareholders as the face value of awards will fall if the share price falls and the face value of the awards will rise if the share  
price rises. 

As disclosed in last year’s Directors’ Report on Remuneration, the PSP awards for 2015 were reduced by c. 10% – 20% to reﬂect  
the strong share price performance by the Group over the last four years. The award for the Group Chief Executive and Group 
Finance Director is c. 200% of salary. Also as disclosed last year, the ROCE performance target has been increased to 21% to 25% 
(compared with 18% to 21% for previous awards) to ensure that the targets remain stretching. 

Under the CIP, Stefan Bomhard and John McConnell invested 50% of net salary (27.5% of gross salary) and received an award  
of 100% of salary. Performance conditions for awards made in 2015 are as follows:

Normal PSP/CIP
Three-year EPS growth p.a. (75% of weighting)

Less than 5%

5%

13%

Between 5% and 13%

Three-year average ROCE (25% of weighting)

Less than 21%

21%

25%

Between 21% and 25%

Enhanced PSP
Three-year EPS growth p.a. (100% of weighting)

Less than 13%

18%

Between 13% and 18%

Vesting %

0%

25%

100%

Straight line basis

Vesting %

0%

25%

100%

Straight line basis

Vesting %

0%

100%

Straight line basis

Threshold level performance will result in 25% of the 2015 normal PSP and CIP awards vesting and no vesting of the 2015 
enhanced PSP awards. 

Award made to Stefan Bomhard (SB Award)

Stefan Bomhard received an award in lieu of forfeited incentives from his previous employer when he joined the Group on  
1 April 2015. This award consisted of 205,125 nil-cost options with an exercise price of 10p, the nominal cost of an Inchcape  
share. One third of this award vests on each of the ﬁrst, second and third anniversaries of the grant date (i.e. 1 April 2016, 2017, 
and 2018) dependent on continued employment. The value and structure of the award reﬂects the performance conditions  
and vesting schedule attached to the forfeited awards and is in line with the Policy.

Awards made during the year are:

Date of grant

Share price (p)*

Number of shares/ 
options awarded

Face value at grant**

Performance period

Exercise period

Stefan Bomhard

Normal PSP

Enhanced PSP

CIP

SAYE

SB Award

John McConnell

Normal PSP

Enhanced PSP

CIP

17 April 2015

17 April 2015

17 April 2015

24 Sept 2015

1 April 2015

17 April 2015

17 April 2015

17 April 2015

832.0

832.0

832.0

578.0

800.0

832.0

832.0

832.0

143,734

15,971

77,408

1,557

205,125

98,044

10,894

52,801

*   Mid market share price on date of grant or option price for SAYE.
** Face value has been calculated using the share price at date of grant.

£1,195,867

Jan 2015 – Dec 2017 April 2018 – April 2019

£132,879

Jan 2015 – Dec 2017 April 2018 – April 2019

£644,035

Jan 2015 – Dec 2017 April 2018 – Oct 2018

£9,000

£1,641,000

n/a Nov 2018 – April 2019

n/a April 2016 – April 2025

£815,726

Jan 2015 – Dec 2017 April 2018 – April 2019

£90,638

Jan 2015 – Dec 2017 April 2018 – April 2019

£439,304

Jan 2015 – Dec 2017 April 2018 – Oct 2018

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Long-term incentives for 2016
For 2016, it is anticipated that Stefan Bomhard, Group Chief Executive, will receive 143,734 normal PSP awards and  
15,971 enhanced PSP awards. 

Richard Howes, the new Chief Financial Ofﬁcer, will receive a ﬁxed number of PSP awards, both normal and enhanced,  
worth 200% of salary at date of grant. Richard will also be granted replacement shares in lieu of existing long-term awards  
from his previous employer, which he forfeited to join the Group. Some of these shares will have performance conditions. Further 
information on the awards will be provided in the relevant RNS statement and in the 2016 Directors’ Report on Remuneration. 

The awards granted in 2016 are expected to have the same performance measures as the awards granted in 2015. 

Executive share ownership and Directors’ interests (audited)
The table below shows the total number of shares, options and awards held by each Director at 31 December 2015. The  
Executive Directors are required to hold a ﬁxed number of shares equivalent to 200% of base salary. They have ﬁve years  
from the date of appointment to reach this shareholding. 

Nil cost awards 

Options held

Stefan Bomhard

Alison Cooper

Ken Hanna

André Lacroix*

John Langston

John McConnell 

Coline McConville

Nigel Northridge

Till Vestring 

Shares held at  

31 December 2015

33,339

4,134

70,000

28,934

2,146

191,346

717

27,182

62,742

Subject to 
performance 
conditions

442,238

n/a

n/a

1,283,149

n/a

510,658

n/a

n/a

n/a

Subject to deferral

Subject to deferral

Vested but not yet 
exercised

Guideline met

0

n/a

n/a

n/a

n/a

0

n/a

n/a

n/a

1,557

n/a

n/a

1,890

n/a

1,333

n/a

n/a

n/a

0

n/a

n/a

n/a

n/a

0

n/a

n/a

n/a

No

n/a

n/a

n/a

n/a

Yes

n/a

n/a

n/a

*  Shares and awards held by André Lacroix on his date of leaving, 31 March 2015. Any unvested awards lapsed as at that date. 

There have been no changes to the number of shares held by the Directors between 31 December 2015 and 14 March 2016.

John McConnell exercised 117,866 PSP awards on 20 April 2015. The share price on exercise was 829.6p. He sold all shares  
upon exercise and made a gain of £977,904. 

John McConnell also exercised 108,180 CIP awards on 22 June 2015. The share price on exercise was 854.2p. He sold all  
shares upon exercise and made a gain of £924,112. 

Employees representing the most senior executives (c.80) 
have been selected as this group is large enough to provide 
a robust comparison, whilst also providing data that is readily 
available on a matched sample basis. These employees also 
participate in bonus schemes of a similar nature to Executive 
Directors and therefore remuneration will be similarly 
inﬂuenced by Company performance.

The changes for the Group Chief Executive have been  
determined with reference to aggregate numbers in 2015  
for Stefan Bomhard and André Lacroix when undertaking  
their Chief Executive responsibilities. 

Percentage change in Group Chief  
Executive remuneration
The table shows the percentage change in Group  
Chief Executive remuneration from 2014 compared  
with the average percentage change in remuneration  
for senior management. For the purposes of this disclosure, 
remuneration comprises salary, beneﬁts (excluding pension) 
and annual bonus only.

Salary 

Taxable beneﬁts1 

Taxable beneﬁts2

Single-year variable 

Total 

Change in remuneration from 2014 to 2015

Group Chief Executive 

Senior management

(15.6)%

1,116.7%

15.0%

(55.3)%

(29.5)%

1.48%

0%

(43.81)%

(15.28)%

1.  Percentage change in beneﬁts for the CEO including  
relocation allowance which is paid until March 2016.

2.  Percentage change in beneﬁts for the CEO excluding  

relocation allowance. 

inchcape.com 75

 
 
DIRECTORS’ REPORT ON REMUNERATION CONTINUED

Relative importance of spend on pay
The table below shows the percentage change in total employee pay expenditure and shareholder distributions (i.e. dividends 
and share buy backs) from 2014 to 2015.

Distribution to shareholders:

Dividend 

Share buy back

Employee remuneration 

2015 
£m

91.1

91.4

474.0

2014 
£m

81.5

100.0

464.7

% change

11.8%

(8.6)%

2.0%

As at 31 December 2015, £91.4m had been returned to shareholders under the share buy back programmes.

The Directors are proposing a ﬁnal dividend for 2015 of 14.1p per share (2014:13.8p). 

Pay for performance
The graph below shows the Total Shareholder Return (TSR) of the Company over the seven-year period to 31 December 2015.  
The FTSE mid 250 excluding investment trusts has been chosen as the most suitable comparator group as it is the general market 
index in which the Company appears. The table below details the Group Chief Executive’s single ﬁgure remuneration and actual 
variable pay outcomes over the same period.

Historical TSR performance
Growth in the value of a hypothetical £100 holding  over the 7 years to 31 December 2015

9
0
0
2

y
r

a
u
n
a
J

1
t

a
d
e
t
s
e
v
n

i

0
0
1
£

f

o
e
u
a
V

l

1,500

1,200

900

600

300

0

Notes:
1.  The amount for André Lacroix in 2015 reﬂects 

remuneration received until he left the Group  
in March 2015. 

2.  Stefan Bomhard was appointed as Group Chief 
Executive on 1 April 2015. The amount reﬂects his 
remuneration from that time to 31 December 2015  
and includes relocation allowance and his share  
award in lieu of forfeited awards. 

3.  LTI includes CIP, normal PSP awards, enhanced PSP 
awards and executive share options prior to 2013. 

08

09

10

11

12

13

14

15

Inchcape

FTSE mid 250 excluding investment trusts

Group Chief Executive

2009

2010

2011

2012

2013

2014

Single ﬁgure of remuneration (£’000)

Annual bonus outcome (% of maximum)

LTI vesting3 outcome (% of maximum)

André Lacroix

Stefan Bomhard

1,984

1,984

2,993

2,165

4,400

5,625

n/a

100%

0%

n/a

100%

n/a

52%

n/a

68%

0%

100%

100%

n/a

48%

66%

n/a

2,9062

100%

56.8%

68%

n/a

2015

2941

Dilution limits
During the year, options and awards granted under the Group’s incentive plans were satisﬁed on exercise by market purchase 
shares. Dilution limits are monitored throughout the year by the Committee and the Company complies with the limits set by  
the Association of British Insurers.

Issued share capital as at 31 December 2015

All schemes – 10% over 10-year rolling period 

Remaining headroom for all schemes 

Executive schemes – 5% over a 10-year rolling period 

Remaining headroom for executive schemes 

76

Inchcape Annual Report and Accounts 2015

436m

43.6m

17.4m

21.8m

2.8m

 
 
 
 
 
 
 
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Shareholder context
The table below shows the advisory vote on the Remuneration Report at the 2015 AGM. 

For (including discretionary)

Against 

Total votes cast (excluding votes withheld)

Votes withheld*

Total votes cast (including votes withheld)

Total number of votes

% of votes cast

331,452,000

7,989,764

339,441,764

3,616,134

343,057,898

97.65%

2.35%

100%

*  Withheld votes are not included in the ﬁnal proxy ﬁgures as they are not recognised as a vote in law. 

The remuneration policy was submitted for a binding vote at the 2014 AGM where it received a 96.45% ‘for’ vote out  
of 376,626,838 total votes cast (including votes withheld).

It is the policy of the Committee to consult with certain shareholders prior to any major changes to the remuneration policy  
and the Committee will do this in advance of when the remuneration policy is next submitted for approval at the 2017 AGM. 

Exit payments during the year
No exit payments were made in 2015.

John McConnell left the Group on 29 February 2016. In line with his status, his outstanding incentives will be treated as follows:

2016 annual bonus
John is entitled to receive a 2016 bonus, which he will receive as soon as possible after his departure. The bonus payout will be 
pro-rated for time spent in employment during 2016 and will assume target performance. His bonus payout is therefore £44,338. 

2014 and 2015 PSP and CIP awards
•  All awards will vest at the end of the normal vesting period dependent on EPS and ROCE targets met over the  

performance period.

•  The 2015 PSP and CIP awards will be pro-rated for time spent in employment during the relevant performance period. No  

time pro-ration will be applied to his 2014 PSP awards.

•  Vesting of any matching awards under the 2014 and 2015 CIP remains dependent on retaining investment shares until the  

end of the relevant period. 

John will also receive payment in lieu of notice of £299,728 which equates to six months’ base salary and beneﬁts. Beneﬁts  
valued in the payment include pension allowance, life assurance, company car, and private medical cover. 

Payments to past Directors
No payments were made to past Directors in 2015.

Other directorships
The Executive Directors are generally permitted to take one non-executive directorship as long as it does not lead to conﬂicts  
of interest or undue time commitment.

John McConnell is a Non-Executive Director of UBM plc, for which he receives a fee of £70,000.

Advisors to the Committee
Kepler, a brand of Mercer (and part of the MMC group), acted as the independent remuneration advisor to the Committee 
during the year. Kepler attends Committee meetings and provides advice on remuneration for executives, analysis of elements  
of the remuneration policy and regular market and best practice updates. Kepler reports directly to the Committee Chairman 
and is a signatory and adheres to the Code of Conduct for Remuneration Consultants (which can be found at  
www.remunerationconsultantsgroup.com). 

Mercer also supplies unrelated services to the Group in relation to IAS 19. The Committee is satisﬁed that the advice it receives 
from Kepler is objective and independent and that Kepler does not have any connection with the Company that may impair  
its independence. Kepler’s fees are charged at an hourly rate in accordance with the terms and conditions set out in the 
Engagement Letter. Kepler was paid fees of £78,045 for its services during the year, excluding expenses and VAT.

The Directors’ Report on Remuneration was approved by the Board and has been signed by Nigel Northridge on its behalf.

NIGEL NORTHRIDGE

Chairman of the Remuneration Committee

inchcape.com 77

 
 
DIRECTORS’ REPORT

Board of Directors
The Directors of the Company who were in ofﬁce during  
the year were:

Vicky Bindra – left October 2015 
Stefan Bomhard – joined April 2015 
Simon Borrows – left May 2015 
Alison Cooper 
Ken Hanna 
André Lacriox – left March 2015 
John McConnell 
Coline McConville  
Nigel Northridge  
Nigel Stein – joined October 2015 
Till Vestring

 In accordance with the 2014 UK Corporate Governance 
Code, the Directors will stand for election or re-election at the 
Annual General Meeting (AGM) on 26 May 2016, apart from 
John McConnell who left the Group on 29 February 2016.

Directors’ Report 
The Directors’ Report for the year ended 31 December 2015 
comprises pages 78 to 80 of this report (together with sections 
incorporated by reference). Some matters normally included 
in the Directors’ Report are included in the Strategic Report  
on pages 4 to 47 including future business development  
and risk management. Details on the breakdown of gender 
for the Directors, senior managers and employees of the 
Company required to be given in the Strategic Report under 
the Companies Act 2006 are given on page 80 of this report. 

Results and dividends
The Group’s audited consolidated ﬁnancial statements for  
the year ended 31 December 2015 are shown on pages  
82 to 159. The Board recommends a ﬁnal ordinary dividend  
of 14.1p per ordinary share.

If approved at the 2016 AGM, the ﬁnal ordinary dividend  
will be paid on 24 June 2016 to shareholders registered in  
the books of the Company at the close of business on  
27 May 2016. Together with the interim dividend of 6.8p per 
ordinary share paid on 4 September 2015, this makes a total 
ordinary dividend for the year of 20.9p per ordinary share 
(2014 – 20.1p).

Auditor and disclosure of information to  
the auditor
So far as the Directors are aware, there is no relevant audit 
information of which the Company’s auditor is unaware.

The Directors have taken all the steps that they ought to  
have taken as Directors in order to make themselves aware  
of any relevant audit information and to establish that the 
Company’s auditor is aware of that information.

Directors’ indemnity
A qualifying third party indemnity (QTPI), as permitted by  
the Company’s Articles of Association and sections 232  
and 234 of the Companies Act 2006, has been granted  
by the Company to each of the Directors of the Company. 
Under the provisions of the QTPI the Company undertakes  
to indemnify each Director against liability to third parties 
(excluding criminal and regulatory penalties) and to pay 
Directors’ costs as incurred, provided that they are reimbursed 
to the Company if the Director is found guilty or, in an action 

78

Inchcape Annual Report and Accounts 2015

brought by the Company, judgment is given against the 
Director. The indemnity has been in force for the ﬁnancial  
year ended 31 December 2015 and until the date of  
approval of this Report. 

Share capital
As at 31 December 2015, the Company’s issued share  
capital of £43,681,009 comprised 436,810,096 ordinary  
shares of 10.0p.

Holders of ordinary shares are entitled to receive the 
Company’s Report and Accounts, to attend and speak  
at General Meetings and to appoint proxies and exercise 
voting rights. The shares do not carry any special rights with 
regard to control of the Company. The rights are set out in  
the Articles of Association of the Company.

Restrictions of transfer of securities 
There are no restrictions or limitations on the holding of 
ordinary shares and no requirements for prior approval  
of any transfers. There are no known arrangements under 
which ﬁnancial rights are held by a person other than the 
holder of the shares. Shares acquired through the Company 
share schemes rank pari passu with the shares in issue and 
have no special rights.

Authority to purchase shares
At the Company’s AGM on 21 May 2015, the Company was 
authorised to make market purchases of up to 44,495,012 
ordinary shares (representing approximately 10.0% of its 
issued share capital). 

In the year ended 31 December 2015, the Company 
purchased, for cancellation, 11,931,693 ordinary shares  
of 10.0p each at a cost of £91.4m, representing 2.73%  
of the issued share capital at that date. 

Interests in voting rights
During the year, the Company had been notiﬁed of the 
following interests pursuant to the Financial Conduct 
Authority’s Disclosure and Transparency Rules. The information 
below was correct at the date of notiﬁcation. It should be 
noted that these holdings are likely to have changed since 
notiﬁed to the Company. However, further notiﬁcation of any 
change is not required until the next threshold is crossed. 

Shareholder

Number of shares 

Standard Life Investments 

30,894,409

Aberdeen Asset Management

26,442,380

Schroders Plc

20,157,836

Capital Group Companies Inc

12,775,830

Percentage 
notiﬁed

7.3%

5.9%

4.4%

2.9%

Source TR-1 notiﬁcations. These are updated on the Company’s 
website.

There have been no notiﬁcations between 31 December 2015 
and 14 March 2016.

Employee beneﬁt trust
The Executive Directors of the Company, together with  
other employees of the Group, are potential beneﬁciaries  
of the Inchcape Employee Trust (the Trust) and, as such,  
are deemed to be interested in any ordinary shares held  
by the Trust.

At 31 December 2015, the Trust’s shareholding totalled 631,253 
ordinary shares. Between 1 January 2016 and 14 March 2016 

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the Trust transferred 107,957 ordinary shares to satisfy the 
exercise of awards under employee share plans.

In respect of LR 9.8.4R(12) and (13), the trustee of the Trust 
agrees to waive dividends payable on the shares it holds  
for satisfying awards under the various share plans. 

Directors’ interests
The table showing the beneﬁcial interests, other than  
share options, including family interests, in the ordinary  
shares of the Company of the persons who were Directors  
at 31 December 2015 is shown in the Directors’ Report on 
Remuneration on page 75.

There have been no changes to the number of shares held 
by Directors between 31 December 2015 and 14 March 2016.

Directors’ responsibilities
The Directors are responsible for preparing the Annual  
Report, the Directors’ Report on Remuneration and the 
ﬁnancial statements in accordance with applicable law  
and regulations.

Company law requires the Directors to prepare ﬁnancial 
statements for each ﬁnancial year. Under that law the 
Directors have prepared the Group ﬁnancial statements in 
accordance with International Financial Reporting Standards 
(IFRS) as adopted by the European Union, and the parent 
Company ﬁnancial statements in accordance with 
applicable law and United Kingdom Accounting Standards 
(United Kingdom Generally Accepted Accounting Practice).

Under company law the Directors must not approve the 
ﬁnancial statements unless they are satisﬁed that they give  
a true and fair view of the state of affairs of the Group and the 
Company and of the proﬁt or loss of the Group for that period. 
In preparing these ﬁnancial statements, the Directors are 
required to:

•  select suitable accounting policies and then apply  

them consistently;

•  make judgements and accounting estimates that are 

reasonable and prudent;

•  state whether IFRS, as adopted by the European Union  

and applicable United Kingdom Accounting Standards, 
have been followed, subject to any material departures 
disclosed and explained in the Group and parent 
Company ﬁnancial statements respectively; and

•  prepare the ﬁnancial statements on the going concern 

basis unless it is inappropriate to presume that the 
Company will continue in business. 

The Directors are responsible for keeping adequate 
accounting records that are sufﬁcient to show and explain 
the Company’s transactions and disclose with reasonable 
accuracy at any time the ﬁnancial position of the Company 
and the Group and enable them to ensure that the ﬁnancial 
statements and the Directors’ Report on Remuneration 
comply with the Companies Act 2006 and, as regards the 
Group ﬁnancial statements, Article 4 of the IAS Regulation. 
They are also responsible for safeguarding the assets  
of the Company and the Group and hence for taking 
reasonable steps for the prevention and detection of  
fraud and other irregularities. The Directors are responsible  
for the maintenance and integrity of the Company’s website. 
Legislation in the United Kingdom governing the preparation 
and dissemination of ﬁnancial statements may differ from 
legislation in other jurisdictions.

Each of the Directors who were in ofﬁce at the date of this 
report whose names and responsibilities are listed on pages 
50 to 51, conﬁrms that, to the best of their knowledge:

•  the Group ﬁnancial statements, which have been prepared 
in accordance with IFRS as adopted by the EU, give a true 
and fair view of the assets, liabilities, ﬁnancial position and 
proﬁt of the Group; and

•  the Operating Review contained on pages 28 to 37 

includes a fair review of the development and performance 
of the business and the position of the Group, together with  
a description of the principal risks and uncertainties that  
it faces.

The Board has reviewed the content of the Annual Report and 
Accounts and considers when taken as a whole that it is fair, 
balanced and understandable and provides the information 
necessary for shareholders to assess the Company’s 
performance and position, business model and strategy.

Going concern
Having assessed the principal risks and the other matters 
discussed in connection with the viability statement on page 
43, the Directors consider it appropriate to adopt the going 
concern basis of accounting in the ﬁnancial statements. 

Articles of Association
The appointment and replacement of Directors is governed 
by the Company’s Articles of Association, the 2014 UK 
Corporate Governance Code, the Companies Act 2006  
and related legislation. 

The Directors have authority to issue and allot ordinary  
shares pursuant to article 9 of the Articles of Association and 
shareholder authority is requested at each AGM. The Directors 
have authority to make market purchases for ordinary shares 
and this authority is also renewed annually at the AGM.

The Articles of Association may be amended by a  
special resolution of the shareholders. Subject to the  
Articles, the Companies Act 2006 and any directions given  
by special resolution, the business of the Company shall  
be managed by the Directors who may exercise all the 
powers of the Company. 

Conﬂicts of interest
The Articles of Association permit the Board to authorise any 
matter which would otherwise involve a Director breaching  
his duty under the Companies Act 2006 to avoid conﬂicts of 
interest. When authorising a conﬂict of interest the Board must 
do so without the conﬂicting Director counting as part of the 
quorum. In the event that the Board considers it appropriate, 
the conﬂicted Director may be permitted to participate in the 
debate, but will be permitted neither to vote nor count in the 
quorum when the decision is being agreed. The Directors are 
aware that it is their responsibility to inform the Board of any 
potential conﬂicts as soon as possible and procedures are  
in place to facilitate disclosure.

Change of control
The Company is not party to any signiﬁcant agreements  
that would take effect, alter or terminate upon a change  
of control of the Company following a takeover bid. However, 
certain of the Group’s third party funding arrangements 
would terminate upon a change of control of the Company. 

inchcape.com 79

 
 
DIRECTORS’ REPORT CONTINUED

The Group’s relationships with its OEM partners are managed 
at Group level, but the relevant contracts are entered into at  
a local level with day-to-day management being led by each 
operating business. Certain of the contracts may terminate  
on a change of control of the local contracting company.  
The Company does not have agreements with any Director  
or employee providing compensation for loss of ofﬁce or 
employment that occurs because of a takeover bid, except 
for provisions in the rules of the Company’s share schemes 
which may result in options or awards granted to employees 
to vest on a takeover.

Transactions with Directors
No transaction, arrangement or agreement, other than 
remuneration, required to be disclosed in terms of the 
Companies Act 2006 and IAS 24, ‘Related Parties’ was 
outstanding at 31 December 2015, or was entered into  
during the year for any Director and/or connected person 
(2014 – none).

Greenhouse gas emissions
The information required under Schedule 7 of the Large  
and Medium-sized Companies and Groups (Accounts  
and Reports) Regulations 2008 in respect of greenhouse  
gas emissions is given in the Environment section of the 
Corporate Responsibility Report on page 47.

Employees
The Company is committed to a policy of treating all its 
colleagues and job applicants equally. We are committed to 
the employment of people with disabilities and will interview 
those candidates who meet the minimum selection criteria.

We provide training and career development for our 
employees, tailored where appropriate to their speciﬁc  
needs, to ensure they achieve their potential. If an individual 
becomes disabled while in our employment, we will do  
our best to ensure continued development in their role, 
including consulting them about their requirements, making 
appropriate adjustments and providing suitable alternative 
positions.

Employee involvement
The information required under Schedule 7 of the Large  
and Medium-sized Companies and Groups (Accounts  
and Reports) Regulations 2008 in respect of employee 
involvement is given in the People section of the  
Corporate Responsibility Report on page 44.

Gender diversity
The breakdown showing the number of female and  
male employees who were (i) Directors of the Company (ii) 
senior managers and (iii) employees of the Company as at 
31 December 2015: 

Board

Senior management

All employees

Male

Female

7

76

77.8%

88.4%

2

10

22.2%

11.6%

Total

9

86

10,779 

73.4%

3,912 

26.6%

14,691 

Financial instruments
The information required under Schedule 7 of the Large  
and Medium-sized Companies and Groups (Accounts  
and Reports) Regulations 2008 in respect of ﬁnancial 
instruments is given in note 23 to the ﬁnancial statements  
on pages 126 to 132.

80

Inchcape Annual Report and Accounts 2015

Principal ﬁnancial risk factors
These risks are shown on pages 40 and 43.

Events after the reporting period
In the period from 1 January 2016 to 14 March 2016,  
the Company purchased, for cancellation, a further  
4,541,107 ordinary shares of 10.0p each at a cost of  
£32.0m (including costs). The Company is committed to 
completing the share buy back programme by 30 June 2016.

Other information – Listing rules
For the purposes of LR 9.8.4 R, the information required to  
be disclosed by LR 9.8.4 R can be found on the pages set  
out below: 

Section

Information

Interest capitalised 

Publication of unaudited ﬁnancial 
information

Page

Not material  
to the Group

76 (TSR Graph)

Details of long-term incentive schemes

73-75

Waiver of emoluments by a director

Not applicable

Waiver of future emoluments by a director

Not applicable 

Non pre-emptive issues of equity for cash

Not applicable 

Non pre-emptive issue by a major  
subsidiary undertaking 

Parent participation in a placing by a  
listed subsidiary 

Contracts of signiﬁcance 

Provision of services by a controlling 
shareholder

Shareholder waivers of dividends 

Shareholder waiver of future dividends 

Not applicable

Not applicable 

Not applicable

Not applicable

79

79

Agreements with controlling shareholders  Not applicable

1

2

4

5

6

7

8

9

10

11

12

13

14

Corporate governance statement

The statement of compliance with the 2014 UK Corporate 
Governance Code and the information required under DTR7 
is given in the Corporate Governance Report on page 52. 

Annual General Meeting
The AGM will be held at 11.00 a.m. on Thursday, 26 May 2016 
at Deutsche Bank AG, Winchester House, 1 Great Winchester 
Street. London EC2N 2DB. The notice convening the meeting 
and the resolutions to be put to the meeting, together with the 
explanatory notes, are given in the Circular to all shareholders.

The auditors, PricewaterhouseCoopers LLP, have indicated 
their willingness to continue in ofﬁce. A resolution to reappoint 
them as auditors will be proposed at the AGM.

The Directors’ Report and the Strategic Report were approved 
by the Board and have been signed by the Company 
Secretary on its behalf.

TAMSIN WATERHOUSE

Group Company Secretary

FINANCIAL STATEMENTS

  82  Consolidated income statement
  83  Consolidated statement of comprehensive income
  84  Consolidated statement of ﬁnancial position
  85  Consolidated statement of changes in equity
  86  Consolidated statement of cash ﬂows
  87  Accounting policies
  94  Notes to the ﬁnancial statements
 139  Five year record
 140  Report of the auditors – Group
 145  Company statement of ﬁnancial position
 146  Company statement of changes in equity
 147  Accounting policies
 149  Notes to the ﬁnancial statements
 158  Report of the auditors – Company

Other information
 160  Shareholder information

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inchcape.com 81

 
 
Consolidated income statement 
For the year ended 31 December 2015 

Revenue 

Cost of sales 

Gross profit 

 Before 
exceptional 
items 
2015
£m 

Exceptional 
items
(note 2)
2015
£m 

Notes

 Before 
exceptional 
items  
2014 
£m 

 Exceptional 
items
(note 2)
2014
£m 

Total
2015
£m 

 Total
2014
£m 

1, 3

6,836.3

–

6,836.3

6,702.7 

(5,847.5)

– (5,847.5) (5,749.1) 

988.8

–

988.8

953.6 

–

–

–

6,702.7

(5,749.1)

953.6

Net operating expenses  

3

(664.1)

(49.5)

(713.6)

(635.2) 

(47.4)

(682.6)

Operating profit  
Share of profit / (loss) after tax of joint ventures and 
associates 

Profit before finance and tax 

Finance income  

Finance costs 

Profit before tax 

Tax  

Profit for the year 

Profit attributable to: 

– Owners of the parent 

– Non-controlling interests 

Basic earnings per share (pence) 

Diluted earnings per share (pence) 

13

6

7

8

9

9

324.7

(49.5)

275.2

318.4 

(47.4)

271.0

0.7

325.4

14.4

(27.7)

312.1

(74.9)

237.2

–

0.7

(49.5)

275.9

–

–

14.4

(27.7)

(49.5)

262.6

(4.8)

(79.7)

(54.3)

182.9

(1.9) 

316.5 

14.8 

(28.1) 

303.2 

(68.6) 

234.6 

–

(47.4)

–

–

(47.4)

–

(47.4)

175.8

7.1

182.9

39.8p

39.4p

(1.9)

269.1

14.8

(28.1)

255.8

(68.6)

187.2

179.6

7.6

187.2

39.7p

39.0p

The notes on pages 94 to 138 are an integral part of these consolidated financial statements. 

82 
82

Inchcape plc Annual Report and Accounts 2015 

Inchcape Annual Report and Accounts 2015

 
 
 
 
 
 
 
 
Consolidated statement of comprehensive income 
For the year ended 31 December 2015 

Profit for the year  

Other comprehensive income: 

Items that will not be reclassified to the consolidated income statement 

Defined benefit pension scheme remeasurements  

Joint venture defined benefit pension scheme remeasurements 

Deferred tax recognised in consolidated statement of comprehensive income 

Items that may be or have been reclassified subsequently to the consolidated income statement 

Cash flow hedges 

Fair value losses on available for sale financial assets 

Effect of foreign exchange rate changes 

Notes 

2015 
£m 

2014 
£m

182.9

187.2

5 

13 

16 

(26.8)

–

1.2

(25.6)

2.5

(0.2)

(0.9)

1.4

14, 25 

25.9

–

(17.4)

(0.3)

(49.9)

(180.6)

Deferred tax recognised in consolidated statement of comprehensive income 

16 

(7.7)

5.2

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Other comprehensive loss for the year, net of tax 

Total comprehensive income / (loss) for the year  

Total comprehensive income / (loss) attributable to: 

– Owners of the parent 

– Non-controlling interests 

The notes on pages 94 to 138 are an integral part of these consolidated financial statements. 

(31.7)

(193.1)

(57.3)

(191.7)

125.6

(4.5)

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117.7

(10.3)

7.9

125.6

5.8

(4.5)

www.inchcape.com 

83 
inchcape.com 83

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated statement of financial position 
As at 31 December 2015 

Non-current assets 

Intangible assets 
Property, plant and equipment 
Investments in joint ventures and associates 
Available for sale financial assets
Trade and other receivables 
Deferred tax assets 
Retirement benefit asset 

Current assets 

Inventories 
Trade and other receivables 
Available for sale financial assets
Derivative financial instruments 
Current tax assets 
Cash and cash equivalents 

Assets held for sale and disposal group 

Total assets 

Current liabilities 
Trade and other payables 
Derivative financial instruments 
Current tax liabilities 
Provisions 
Borrowings 

Non-current liabilities 
Trade and other payables 
Provisions 
Derivative financial instruments 
Deferred tax liabilities 
Borrowings 
Retirement benefit liability 

Total liabilities 

Net assets 

Equity 
Share capital  
Share premium 
Capital redemption reserve 
Other reserves 
Retained earnings 

Equity attributable to owners of the parent 

Non-controlling interests 

Total equity 

 Notes  

2015 
£m 

2014 
£m 

11 
12 
13 
14 
15 
16 
5 

17 
15 
14 
23 

18 

19 

418.4
644.0
5.3
1.2
47.2
18.7
124.3

471.6
657.6
9.0
1.2
28.3
25.7
147.8

1,259.1

1,341.2

1,224.4
327.8
0.2
134.5
4.0
473.8

999.2
285.2
0.2
102.6
3.0
528.2

2,164.7

1,918.4

4.5

8.9

2,169.2

1,927.3

3,428.3

3,268.5

20  (1,566.1) (1,300.7)
(3.6)
(28.3)
23 
(70.7)
(63.9)
(22.7)
(28.7)
(103.3)
(112.2)

21 
22 

  (1,766.4) (1,533.8)

20 
21 
23 
16 
22 
5 

(12.8)
(26.5)
–
(43.8)
(311.5)
(25.4)

(14.8)
(25.6)
(1.6)
(40.2)
(305.9)
(28.5)

(420.0)

(416.6)

  (2,186.4) (1,950.4)

1,241.9

1,318.1

24 

25 
26 

43.8
146.7
136.8
(215.1)
1,106.8

45.0
146.7
135.6
(182.6)
1,148.2

1,219.0

1,292.9

22.9

25.2

1,241.9

1,318.1

The notes on pages 94 to 138 are an integral part of these consolidated financial statements. The consolidated financial 
statements on pages 82 to 138 were approved by the Board of Directors on 14 March 2016 and were signed on its behalf by: 

Stefan Bomhard, 
Group Chief Executive 

Ken Hanna, 
Chairman

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Consolidated statement of changes in equity 
For the year ended 31 December 2015 

Share 
capital
£m

Share 
premium 
£m

Capital 
redemption 
reserve
£m

Other 
reserves
(note 25) 
£m

Retained 
earnings
(note 26) 
£m

  Notes 

Equity 
attributable 
to owners of 
the parent 
£m 

Non 
controlling 
interests
£m

Total
shareholders’
 equity
£m

At 1 January 2014  

46.5

145.7

134.1

8.7

1,135.0

1,470.0 

29.2

1,499.2

Profit for the year  

Other comprehensive (loss) /  
income for the year  

Total comprehensive (loss) /  
income for the year  

Share-based payments, net of tax 

4,16 

–

–

–

–

Share buy back programme 

24 

(1.5)

Net disposal of own shares by the 
Inchcape Employee Trust 

Issue of ordinary share capital 

Dividends: 

– Owners of the parent 

– Non-controlling interests 

At 1 January 2015  

Profit for the year 

Other comprehensive (loss) /  
income for the year 

Total comprehensive income /  
(loss) for the year  

24 

10 

–

–

–

–

–

–

–

–

Share-based payments, net of tax 

4,16 

Share buy back programme 

24 

(1.2)

Net purchase of own shares by the 
Inchcape Employee Trust 

Dividends: 

– Owners of the parent 

– Non-controlling interests 

At 31 December 2015 

10 

–

–

–

–

–

–

–

–

–

1.0

–

–

–

–

–

–

1.5

–

–

–

–

–

179.6

179.6 

7.6

187.2

(191.3)

1.4

(189.9) 

(1.8)

(191.7)

(191.3)

181.0

(10.3) 

5.8

(4.5)

–

–

–

–

–

–

12.5

12.5 

(100.0)

(100.0) 

1.2

–

1.2 

1.0 

(81.5)

(81.5) 

–

–

–

–

–

–

– 

(9.8)

12.5

(100.0)

1.2

1.0

(81.5)

(9.8)

45.0

146.7

135.6 (182.6) 1,148.2

1,292.9 

25.2

1,318.1

–

–

–

–

–

–

–

–

–

–

–

–

1.2

–

–

–

–

175.8

175.8 

7.1

182.9

(32.5)

(25.6)

(58.1) 

0.8

(57.3)

(32.5)

150.2

117.7 

7.9

125.6

–

–

–

–

–

9.8

9.8 

(91.4)

(91.4) 

(18.9)

(18.9) 

(91.1)

(91.1) 

–

–

–

–

–

– 

(10.2)

9.8

(91.4)

(18.9)

(91.1)

(10.2)

43.8

146.7

136.8 (215.1) 1,106.8

1,219.0 

22.9

1,241.9

The notes on pages 94 to 138 are an integral part of these consolidated financial statements. 

Share-based payments include a net tax credit of £0.2m (current tax credit of £2.0m and a deferred tax charge of £1.8m)  
(2014 – deferred tax credit of £3.0m). 

www.inchcape.com 

85 
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Consolidated statement of cash flows 
For the year ended 31 December 2015 

Cash flows from operating activities 

Cash generated from operations 

Tax paid 

Interest received  

Interest paid 

Net cash generated from operating activities 

Cash flows from investing activities 

Acquisition of businesses, net of cash and overdrafts acquired 

Net cash inflow from sale of businesses 

Purchase of property, plant and equipment 

Purchase of intangible assets 

Proceeds from disposal of property, plant and equipment 

Net disposal of available for sale financial assets 

Dividends received from joint ventures and associates 

Net cash used in investing activities 

Cash flows from financing activities  

Proceeds from issue of ordinary shares 

Share buy back programme 

Net (purchase) / disposal of own shares by the Inchcape Employee Trust 

Net cash inflow from borrowings 

Payment of capital element of finance leases 

Equity dividends paid  

Dividends paid to non-controlling interests 

Net cash used in financing activities 

Net (decrease) / increase in cash and cash equivalents 

Cash and cash equivalents at the beginning of the year 

Effect of foreign exchange rate changes 

Cash and cash equivalents at the end of the year 

Cash and cash equivalents consist of: 

– Cash at bank and cash equivalents 

– Short-term deposits 

– Bank overdrafts 

The notes on pages 94 to 138 are an integral part of these consolidated financial statements.

Notes 

27a 

28 

28 

10 

27b 

 2015 
£m 

 2014
£m 

328.4

(69.6)

10.1

(27.5)

241.4

(5.1)

5.4

(50.2)

(19.0)

15.6

–

–

405.8

(52.5)

13.5

(31.3)

335.5

3.6

1.9

(48.5)

(21.3)

34.8

7.9

2.2

(53.3)

(19.4)

–

1.0

(91.4)

(18.9)

3.7

(0.5)

(91.1)

(10.2)

(100.0)

1.2

0.1

(1.2)

(81.5)

(9.8)

(208.4)

(190.2)

(20.3)

416.8

(21.2)

375.3

125.9

332.2

(41.3)

416.8

Notes 

 2015
£m 

2014 
£m 

18 

18 

22 

335.3

138.5

368.9

159.3

(98.5)

(111.4)

375.3

416.8

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Accounting policies 

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards 
(IFRS) as adopted by the European Union and IFRS Interpretations Committee (IFRS IC) interpretations and with those parts  
of the Companies Act 2006 applicable to companies reporting under IFRS. 

Accounting convention 
The consolidated financial statements have been prepared under the historical cost convention, except for available for sale 
financial assets, and those financial assets and financial liabilities (including derivative instruments) held at fair value through 
profit or loss, which are measured at fair value. 

Going concern 
Having assessed the principal risks and the other matters discussed in connection with the viability statement, the Directors  
have considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements. 

Changes in accounting policy and disclosures 
The accounting policies have been applied consistently throughout the reporting period, other than where new policies  
have been adopted as presented below. 

The following standards were in issue but were not 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 2016 subject to 
EU endorsement. 

•  IAS 1, ‘Amendment to IAS 1, Presentation of financial statements’. 
•  IAS 12, ‘Amendment to IAS 12, Income taxes’. 
•  IAS 16, ‘Amendment to IAS 16, Property, plant and equipment’. 
•  IAS 16 and IAS 38, ‘Amendment to IAS 16 and IAS 38’. 
•  IAS 27, ‘Amendment to IAS 27, Separate financial statements’. 
•  IFRS 9, ‘Financial instruments’. 
•  IFRS 9, ‘Amendment to IFRS 9, Financial instruments’. 
•  IFRS 10 and IAS 28, ‘Amendments to IFRS 10 and IAS 28’. 
•  IFRS 11, ‘Amendment to IFRS 11, Joint arrangements’. 
•  IFRS 14, ‘Regulatory deferral accounts’. 
•  IFRS 15, ‘Revenue from contracts with customers’. 
•  IFRS 16, ‘Leases’. 
•  Annual improvements (2012 – 2014). 

Management are currently reviewing the new standards to assess the impact that they may have on the Group’s reported 
position and performance. 

www.inchcape.com 

87 
inchcape.com 87

 
 
 
 
Accounting policies continued 

Basis of consolidation 
The consolidated financial statements comprise the financial statements of the parent Company (Inchcape plc) and all of  
its subsidiary undertakings (defined as those where the Group has control), together with the Group’s share of the results of 
its joint ventures (defined as those where the Group has joint control) and associates (defined as those where the Group has 
significant influence but not control). The results of subsidiaries are consolidated and the Group’s share of results of its joint 
ventures and associates is equity accounted for as of the same reporting date as the parent Company, using consistent 
accounting policies.  

The results of newly acquired subsidiaries are consolidated using the acquisition method of accounting from the date on which 
control of the net assets and operations of the acquired company are effectively transferred to the Group. Similarly, the results 
of subsidiaries disposed of cease to be consolidated from the date on which control of the net assets and operations are 
transferred out of the Group. 

The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from 
non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of 
net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. 

Investments in joint ventures and associates are accounted for using the equity method, whereby the Group’s share of post-
acquisition profits or losses is recognised in the consolidated income statement, and its share of post-acquisition movements in 
shareholders’ equity is recognised in shareholders’ equity. If the Group’s share of losses in a joint venture or associate equals or 
exceeds its investment in the joint venture or associate, the Group does not recognise further losses, unless it has contractual 
obligations or made payments on behalf of the joint venture or associate. 

Intercompany balances and transactions and any unrealised profits arising from intercompany transactions are eliminated  
in preparing the consolidated financial statements. 

Foreign currency translation 
Transactions included in the results of each of the Group’s entities are measured using the currency of the primary economic 
environment in which the entity operates (the functional currency). The consolidated financial statements are presented in 
Sterling, which is the functional currency of the parent Company, Inchcape plc, and the presentation currency of the Group.  

In the individual entities, transactions in foreign currencies are translated into the functional currency at the rates of exchange 
prevailing at the dates of the individual transactions. Monetary assets and liabilities denominated in foreign currencies are 
subsequently retranslated at the rate of exchange ruling at the end of the reporting period. All differences are taken to the 
consolidated income statement, except those arising on long-term foreign currency borrowings used to finance or hedge 
foreign currency investments which on consolidation are taken directly to other comprehensive income.  

The assets and liabilities of foreign operations are translated into Sterling at the rate of exchange ruling at the end of the 
reporting period. The income statements of foreign operations are translated into Sterling at the average rates of exchange for 
the period. Exchange differences arising from 1 January 2004 are recognised as a separate component of shareholders’ equity. 
On disposal of a foreign operation, any cumulative exchange differences held in shareholders’ equity are transferred to the 
consolidated income statement.  

Revenue, other income and cost of sales 
Revenue from the sale of goods and services is measured at the fair value of consideration receivable, net of rebates and any 
discounts, and includes lease rentals and finance and insurance commission. It excludes sales related taxes and intra-group 
transactions. Where the Group acts as an agent on behalf of a principal, the commission earned is recorded within revenue. 

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can  
be reliably measured. In practice this means that revenue is recognised when vehicles or parts are invoiced and physically 
dispatched or when the service has been undertaken. Revenue from commission is recognised when receipt of payment  
can be assured. 

Where a vehicle is sold to a leasing company and a Group company retains a residual value commitment to buy back  
the vehicle for a specified value at a specified date, the sale is not recognised on the basis that the value of the asset will be 
realised over the lease period and from the disposal of the vehicle at the end of the lease period. These vehicles are retained 
within ‘property, plant and equipment’ in the consolidated statement of financial position at cost and are depreciated to their 
residual value over the life of the lease. Total revenue on a leased vehicle comprises the difference between consideration 
receivable and residual value. This sits as deferred income in the consolidated statement of financial position and is released  
to the consolidated income statement on a straight line basis over the life of the lease. The residual value commitment, which 
reflects the price at which the vehicle will be bought back, is held within ‘trade and other payables’, according to the date of 
the commitment. 

Dividend income is recognised when the right to receive payment is established.  

Finance income is recognised when it is probable that the economic benefits will flow to the Group and the amount of income 
can be measured reliably. It is accrued on a time basis by reference to the principal outstanding and at the effective interest 
rate applicable. 

Cost of sales includes the expense relating to the estimated cost of self-insured warranties offered to customers. These 
warranties form part of the package of goods and services provided to the customer when purchasing a vehicle and  
are not a separable product. 

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Share-based payments 
The Group operates various share-based award schemes. The fair value at the date at which the share-based awards are 
granted is recognised in the consolidated income statement (together with a corresponding increase in shareholders’ equity) 
on a straight line basis over the vesting period, based on an estimate of the number of shares that will eventually vest. At the  
end of each reporting period, the Group revises its estimates of the number of awards that are expected to vest. The impact  
of any revision is recognised in the consolidated income statement with a corresponding adjustment to equity. 

For equity-settled share-based awards, the services received from employees are measured by reference to the fair value of  
the awards granted. With the exception of the Group Save As You Earn scheme, the vesting of all share-based awards under all 
schemes is solely reliant upon non-market conditions, therefore no expense is recognised for awards that do not ultimately vest. 
Where an employee or the Company cancels an award, the charge for that award is recognised as an expense immediately, 
even though the award does not vest. 

Finance costs 
Borrowing costs which are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised 
as part of the cost of that asset from the first date on which the expenditure is incurred for the asset and until such time as  
the asset is ready for its intended use. A Group capitalisation rate is used to determine the magnitude of borrowing costs 
capitalised on each qualifying asset. This rate is the weighted average of Group borrowing costs, excluding those borrowings 
made specifically for the purpose of obtaining a qualifying asset. 

All other borrowing costs are recognised as an expense in the period in which they are incurred. 

Income tax  
The charge for current income tax is based on the results for the period as adjusted for items which are not taxed or are 
disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.  

Deferred income tax is accounted for using the liability method in respect of temporary differences arising from differences 
between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.  

In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised  
to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be 
utilised. Such assets and liabilities are not recognised if the temporary difference is due to goodwill arising on a business 
combination, or to an asset or liability, the initial recognition of which does not affect either taxable or accounting income. 

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, joint ventures  
and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the 
temporary difference will not reverse in the foreseeable future. 

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability  
is settled using rates enacted or substantively enacted at the end of the reporting period. Deferred tax is charged or credited  
in the consolidated income statement, except when it relates to items credited or charged directly to shareholders’ equity, in 
which case the deferred tax is also dealt with in shareholders’ equity. 

Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention  
to settle balances net. 

Exceptional items  
Items which are both material and non-recurring are presented as exceptional items within their relevant consolidated income 
statement category. The separate reporting of exceptional items helps provide additional useful information regarding the Group’s 
underlying business performance. Examples of events which may give rise to the classification of items as exceptional include gains 
or losses on the disposal of businesses, restructuring of businesses, litigation, asset impairments and exceptional tax related matters.  

Goodwill 
Goodwill represents the excess of the cost of acquisition of a business combination over the Group’s share of the fair value of 
identifiable net assets of the business acquired at the date of acquisition. Goodwill is initially recognised at cost and is held in 
the functional currency of the acquired entity and revalued at the closing exchange rate at the end of each reporting period. 

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. At the date of acquisition, the 
goodwill is allocated to cash generating units for the purpose of impairment testing and is tested at least annually for impairment.  

Gains and losses on disposal of a business include the carrying amount of goodwill relating to the business sold except for 
goodwill arising on business combinations on or before 31 December 1997 which has been deducted from shareholders’  
equity and remains indefinitely in shareholders’ equity. 

Other intangible assets 
Intangible assets, when acquired separately from a business (including computer software), are carried at cost less 
accumulated amortisation and impairment losses. Costs comprise purchase price from third parties as well as internally 
generated development costs where relevant. Amortisation is provided on a straight line basis to allocate the cost of the  
asset over its estimated useful life, which in the case of computer software is three to five years. Amortisation is recognised  
in the consolidated income statement within ‘net operating expenses’. 

Intangible assets acquired as part of a business combination (including back orders and customer contracts) are capitalised 
separately from goodwill if the fair value can be measured reliably on initial recognition. These intangible assets are amortised 
on a straight line basis over their estimated useful life, which is generally less than a year.  

www.inchcape.com 

89 
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Accounting policies continued 

Property, plant and equipment 
Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. Cost comprises  
the purchase price and directly attributable costs of the asset and includes, where relevant, capitalised borrowing costs. 
Depreciation is based on cost less estimated residual value and is included within ‘net operating expenses’ in the consolidated 
income statement, with the exception of depreciation on ‘interest in leased vehicles’ which is charged to ‘cost of sales’. It is 
provided on a straight line basis over the estimated useful life of the asset, except for freehold land which is not depreciated.  
For the following categories, the annual rates used are:  

Freehold buildings and long leasehold buildings  

2.0% 

Short leasehold buildings  

Plant, machinery and equipment  

Interest in leased vehicles  

shorter of lease term or useful life 

5.0% – 33.3% 

over the lease term 

The residual values and useful lives of all assets are reviewed at least at the end of each reporting period and adjusted if necessary. 

Impairment  
Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or circumstances  
indicate that the carrying amount may not be recoverable. Any impairment losses are included within ‘net operating  
expenses’ in the consolidated income statement. 

In addition, goodwill is not subject to amortisation but is tested at least annually for impairment. An impairment loss is 
recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount, the latter being the higher  
of the asset’s fair value less costs to sell and value in use. Value in use calculations are performed using cash flow projections, 
discounted at a pre-tax rate which reflects the asset specific risks and the time value of money.  

A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able  
to collect all amounts due according to the original terms of the receivables. The carrying amount of the asset is reduced 
through the use of an allowance account, and the amount of the loss is recognised in the consolidated income statement 
within ‘net operating expenses’. When a trade receivable is uncollectible, it is written off against the allowance account for 
trade receivables. Subsequent recoveries of amounts previously written off are credited against ‘net operating expenses’ in  
the consolidated income statement. 

Non-financial assets, other than goodwill, which have previously been impaired, are reviewed for possible reversal of the 
impairment at each reporting date. 

Inventories 
Inventories are stated at the lower of cost and net realisable value. Cost comprises expenditure incurred in bringing inventories 
to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs of 
completion and costs to be incurred in marketing, selling and distribution. Used vehicles are carried at the lower of cost or  
fair value less costs to sell, generally based on external market data available for used vehicles. 

Vehicles held on consignment are included within inventories as the Group is considered to have the risks and rewards  
of ownership. The corresponding liability is included within ‘trade and other payables’.  

Inventory can be held on deferred payment terms. All costs associated with this deferral are expensed in the period in which  
they are incurred. 

An inventory provision is recognised in situations where net realisable value is likely to be less than cost (such as obsolescence, 
deterioration, fall in selling price). When calculating the provision, management considers the nature and condition of the 
inventory, as well as applying assumptions around anticipated saleability, determined on conditions that exist at the end of the 
reporting period. With the exception of parts, generally net realisable value adjustments are applied on an item-by-item basis. 

Trade receivables 
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business.  
These are recognised as current assets if collection is due in one year or less. If collection is due in over a year, they are 
presented as non-current assets. 

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest 
method, less provision for impairment. A provision for impairment is established when there is objective evidence that the Group 
will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the 
difference between the asset’s carrying amount and the present value of estimated future cash flows. 

Trade payables 
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. These  
are classified as current liabilities if payment is due in one year or less. If payment is due at a later date, they are presented as  
non-current liabilities.  

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.  

Trade payables include the liability for vehicles held on consignment, with the corresponding asset included within inventories. 

Borrowings 
Borrowings are recognised initially at fair value, net of transaction costs incurred, and are subsequently stated at amortised cost.  
Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated 
income statement over the period of the borrowings, using the effective interest method. 

90 
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Pensions and other post-retirement benefits 
The Group operates a number of retirement benefit schemes.  

The major schemes are defined benefit pension funds with assets held separately from the Group. The cost of providing  
benefits under the plans is determined separately for each plan using the projected unit credit actuarial valuation method. 

The current service cost and gains and losses on settlements and curtailments are included in ‘cost of sales’ or ‘net operating 
expenses’ in the consolidated income statement. Past service costs are similarly recognised in the consolidated income 
statement. Administrative scheme expenses associated with the plans are recorded within ‘net operating expenses’ when 
incurred, in line with IAS 19 (revised). Net interest income or interest cost relating to the funded defined benefit pension plans  
is included within ‘finance income’ or ‘finance costs’, as relevant, in the consolidated income statement. 

Changes in the retirement benefit obligation or asset due to experience and changes in actuarial assumptions are included  
in the consolidated statement of comprehensive income, as actuarial gains and losses, in full in the period in which they arise. 

Where scheme assets exceed the defined benefit obligation, a net asset is only recognised to the extent that an economic 
benefit is available to the Group, in accordance with the terms of the scheme and, where relevant, statutory requirements. 

The Group’s contributions to defined contribution plans are charged to the consolidated income statement in the period  
to which the contributions relate. 

The Group also has a liability in respect of past employees under post-retirement healthcare schemes which have been closed 
to new entrants. These schemes are accounted for on a similar basis to that for defined benefit pension plans in accordance 
with the advice of independent qualified actuaries.  

Provisions 
Provisions are recognised when the Group has a present obligation in respect of a past event, when it is more likely than not that  
an outflow of resources will be required to settle the obligation and where the amount can be reliably estimated. Provisions are 
discounted when the time value of money is considered to be material, using an appropriate risk free rate on government bonds.  

Product warranty provision 
A product warranty provision corresponds to self-insured extended warranties beyond those provided by the manufacturer,  
as part of the sale of a vehicle. Provision is made for the expected cost of labour and parts based on historical claims 
experience and expected future trends.  

Vacant leasehold provision 
A vacant leasehold provision is recognised when the Group is committed to certain leasehold premises for which it no longer  
has a commercial use. It is made to the extent of the estimated future net cost, including existing subtenant arrangements if any.  

Litigation provision 
A litigation provision is recognised when a litigation case is outstanding at the end of the reporting period and there is  
a likelihood that the legal claim will be settled.  

Disposal group and assets held for sale  
Where the Group is actively marketing a business and disposal is expected within one year of the end of the reporting period, 
the assets and liabilities of the associated businesses are separately disclosed in the consolidated statement of financial 
position as a disposal group. Assets are classified as assets held for sale if their carrying amount is to be recovered principally 
through a sale transaction rather than through continuing use. Both disposal groups and assets held for sale are stated at the 
lower of their carrying amount and fair value less costs to sell. 

Segmental reporting 
Segment information is reported in accordance with IFRS 8, ‘Operating segments’, which requires segmental reporting to be  
presented on the same basis as the internal management reporting. The Group’s operating segments are countries and the 
market channels, distribution and retail. These operating segments are then aggregated into reporting segments to combine 
those with similar characteristics. 

Financial instruments  
The Group classifies its financial instruments in the following categories: loans and receivables; held at fair value through  
profit and loss; financial liabilities measured at amortised cost; and available for sale. The classification is determined at initial 
recognition and depends on the purpose for which the financial instruments are required.  

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an  
active market. They are included in current assets, except where the maturity date is more than 12 months after the end  
of the reporting period. They are initially recorded at fair value and subsequently recorded at amortised cost.  

Held at fair value through profit and loss includes derivative financial assets and liabilities, which are further explained  
below. They are classified according to maturity date, within current and non-current assets and liabilities respectively.  

Financial liabilities measured at amortised cost include non-derivative financial liabilities which are held at original cost,  
less amortisation or provisions raised.  

Available for sale financial assets include non-derivative financial assets, such as bonds and equity investments. They are 
classified as non-current assets unless management intends to dispose of them within 12 months of the end of the reporting 
period and are held at fair value.  

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Accounting policies continued 

Cash and cash equivalents 
Cash and cash equivalents in the consolidated statement of financial position comprise cash at bank and in hand,  
short-term bank deposits and money market funds.  

In the consolidated statement of cash flows, cash and cash equivalents comprise cash and cash equivalents, as defined 
above, net of bank overdrafts.  

Leases 
Finance leases, which transfer to the Group substantially all the risks and rewards of ownership of the leased item, are capitalised  
at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. 
Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant  
rate of interest on the remaining balance of the liability. Finance charges are charged to the consolidated income statement. 
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term. 

Leases where the Group does not hold substantially all the risks and rewards of ownership of the asset are classified as 
operating leases. Operating lease rental payments are recognised as an expense in the consolidated income statement  
on a straight line basis over the lease term. 

Offsetting  
Netting in the consolidated statement of financial position only occurs to the extent that there is the legal ability and intention  
to settle net. As such, bank overdrafts are presented in current liabilities to the extent that there is no intention to offset with the 
cash balance. 

Derivative financial instruments  
An outline of the objectives, policies and strategies pursued by the Group in relation to its financial instruments is set out in note 
23 to the consolidated financial statements. 

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured 
at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a 
hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as:  

•  hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or 
•  hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge). 

Fair value hedge 
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the consolidated 
income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the 
hedged risk. The Group only applies fair value hedge accounting for hedging fixed interest risk on borrowings and future fixed 
amount currency liabilities (on its cross currency interest rate swaps). The gain or loss relating to the effective portion of interest 
rate swaps hedging fixed rate borrowings and changes in the fair value of those borrowings are recognised in the consolidated 
income statement within ‘finance costs’. The gain or loss relating to the ineffective portion is also recognised in the consolidated 
income statement within ‘finance costs’. 

Cash flow hedge 
For cash flow hedges that meet the conditions for hedge accounting, the portion of the gains or losses on the hedging 
instrument that is determined to be an effective hedge is recognised directly in other comprehensive income and the ineffective 
portion is recognised within ‘net operating expenses’ in the consolidated income statement. When the hedged forecast 
transaction results in the recognition of a non-financial asset or liability then, at the time the asset or liability is recognised,  
the associated gains or losses that had previously been recognised in other comprehensive income are included in the initial 
measurement of the acquisition cost or other carrying amount of the asset or liability. For all other cash flow hedges, the gains 
or losses that are recognised in other comprehensive income are transferred to the consolidated income statement in the same 
period in which the hedged forecast transaction affects the consolidated income statement. 

Available for sale financial assets 
Gains and losses on available for sale financial assets are recognised in other comprehensive income, until the investment  
is sold or is considered to be impaired, at which time the cumulative gain or loss previously reported in other comprehensive 
income is included in the consolidated income statement. Cumulative gains and losses on investments held for operational 
reasons are included within ‘net operating expenses’. Cumulative gains and losses on investments held for financing purposes 
are included within ‘finance income’ and ‘finance costs’ respectively. 

Share capital 
Ordinary shares are classified as equity. Where the Group purchases the Group’s equity share capital (treasury shares),  
the consideration paid is deducted from shareholders’ equity until the shares are cancelled, reissued or disposed of.  
Where such shares are subsequently sold or reissued, any consideration received is included in shareholders’ equity.  

Dividends 
Final dividends proposed by the Board of Directors and unpaid at the year end are not recognised in the consolidated  
financial statements until they have been approved by the shareholders at the Annual General Meeting. Interim dividends  
are recognised when they are paid. 

Significant accounting judgements and estimates 
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. These are discussed below: 

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Goodwill 
Goodwill is tested at least annually for impairment in accordance with the accounting policy set out above. The recoverable 
amount of cash generating units is determined based on value in use calculations. These impairment calculations require the 
use of estimates including projected future cash flows (see note 11). 

Revenue recognition on vehicles subject to residual value commitments 
Where the Group sells vehicles sourced from within the Group to a finance provider for the purpose of leasing the vehicles  
to a third party, and retains a residual value commitment, the sale is not recognised on the basis that the value of these assets 
will be realised over the lease period and from the disposal of the vehicles at the end of the lease period. 

Residual value commitments 
The Group has residual value commitments on certain leased vehicles. These commitments are an estimate of future market 
value at a specified point in time. The actual market value of vehicles bought back may vary from the committed purchase 
value (see note 30). 

Incentives and other rebates from brand partners 
The Group receives income in the form of various incentives which are determined by our brand partners. The amount we 
receive is generally based on achieving specific objectives, such as a specified sales volume, as well as other objectives 
including maintaining brand partner standards which may include, but are not limited to, retail centre image and design 
requirements, customer satisfaction survey results and training standards. Objectives are generally set and measured on  
either a quarterly or annual basis. 

Where incentives are based on a specific sales volume or number of registrations, the related income is recognised as a 
reduction in cost of sales when it is reasonably certain that the income has been earned. This is generally the later of the date 
the related vehicles are sold or registered or when it is reasonably certain that the related target will be met. Where incentives 
are linked to retail centre image and design requirements, customer satisfaction survey results or training standards, they are 
recognised as a reduction in cost of sales when it is reasonably certain that the incentive will be received for the relevant period. 

The Group may also receive contributions towards advertising and promotional expenditure. Where such contributions  
are received, they are recognised as a reduction in the related expenditure in the period to which they relate. 

Consignment stock 
Vehicles held on consignment have been included in ‘finished goods’ within ‘inventories’ on the basis that the Group  
has determined that it holds the significant risks and rewards attached to these vehicles. 

Product warranty provision  
The product warranty provision requires an estimation of the number of expected warranty claims, and the expected cost  
of labour and parts necessary to satisfy these warranty claims (see note 21).  

Pensions and other post-retirement benefits 
Pension and other post-retirement benefit liabilities are determined based on the actuarial assumptions detailed in note 5. A 
number of these assumptions require a considerable degree of judgement, including the rate of inflation, discount rate and 
expected mortality rates. These assumptions are subject to a review on an annual basis and are determined in conjunction  
with an external actuary. The use of different assumptions could have a material effect on the value of the relevant liabilities  
and could result in a material change to amounts recognised in the income statement over time. 

In November 2015, the TKM Group Pension Scheme completed a buy-in transaction whereby the assets of the scheme were 
invested in a bulk purchase annuity contract that matches the benefits payable to the members of the scheme. The contract 
has been structured to enable the scheme, in time, to move to a full buy-out, following which the insurance company will 
become directly responsible for the pension payments under the scheme. As at 31 December 2015, the bulk purchase annuity 
contract has been accounted for as an asset of the scheme and valued on the same basis as the liabilities that it matches.  
The difference between the cost of the annuity and the value of the associated liabilities has been accounted for as an 
experience loss within other comprehensive income. 

Tax 
The Group is subject to income taxes in a number of jurisdictions. Some degree of estimation is required in determining the 
worldwide provision for income taxes (see note 8). There are a number of transactions and calculations during the ordinary 
course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit 
issues based on estimates of whether additional taxes will be due. The estimate is made separately for each jurisdiction and 
takes into account management’s view of the relevant tax laws and environment applicable to the operations of the Group  
in those jurisdictions. Where the final tax outcome of these matters is different from the amounts that were initially recorded,  
such differences will impact the current tax and deferred tax provisions in the period in which such determination is made.  

In addition, the recognition of deferred tax assets is dependent upon an estimation of future taxable profits that will be available 
against which deductible temporary differences can be utilised (see notes 8 and 16). In the event that actual taxable profits are 
different, such differences may impact the carrying value of such deferred tax assets in future periods.  

Property, plant and equipment and intangible assets 
Property, plant and equipment and intangible 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 value in use calculations which require estimates to be made of future cash flows (see notes 11 and 12). 

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Notes to the financial statements 

1 Segmental analysis 
The Group has determined that the chief operating decision maker is the Executive Committee. 

Emerging markets are those countries in which the Group operates that have started to grow but have yet to reach a mature 
stage of development and accordingly are in or are expected to return to the growth phase of their development cycle. These 
currently comprise Russia, China, the Balkans, the Baltics, Poland, South America and Africa. 

The Group’s reported segments are based on the location of the Group’s assets. Revenue earned from sales is disclosed by 
origin and is not materially different from revenue by destination.  

Transfer prices between segments are set on an arm’s length basis. 

Distribution comprises Vertically Integrated Retail businesses as well as Financial Services and other businesses. 

 Australasia 
£m 

 Europe 
£m 

 North Asia 
£m 

 South Asia
£m 

  Distribution 

 United 
Kingdom  
£m 

 Emerging 
Markets
£m 

 Total 
Distribution 
£m 

761.4
(183.7)
577.7

577.6
(124.5)
453.1

67.0
–

17.9
–

746.2
–
746.2

80.0
–

500.0
–
500.0

51.9
–

62.8 
– 
62.8 

11.4 
– 

466.6
(32.0)
434.6

3,114.6
(340.2)
2,774.4

48.7
–

276.9
–

67.0

17.9

80.0

51.9

11.4 

48.7

276.9

–
67.0

0.7
18.6

–
80.0

–
51.9

– 
11.4 

–
48.7

0.7
277.6

2015 

Revenue 
Total revenue  
Inter-segment revenue  
Revenue from third parties  

Results  
Segment result  
Operating exceptional items  
Operating profit / (loss) after  
exceptional items  
Share of profit after tax of joint ventures 
and associates  
Profit / (loss) before finance and tax  

Finance income  
Finance costs  
Profit before tax  
Tax  
Profit for the year  

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1 Segmental analysis continued 

2015 

Revenue 
Total revenue  
Inter-segment revenue  
Revenue from third parties  

Results  
Segment result  
Operating exceptional items  
Operating profit / (loss) after  
exceptional items  
Share of profit after tax of joint 
ventures and associates  
Profit / (loss) before finance and tax  

Finance income  
Finance costs  
Profit before tax  
Tax  
Profit for the year  

Australasia 
£m 

 Europe 
£m 

 United 
Kingdom
£m 

 Emerging 
Markets
£m 

Retail 

 Total 
Retail 
£m 

 Total pre 
Central  
£m 

 Central
£m 

 Total
£m 

642.2 
– 
642.2 

23.6 
– 

23.6 

– 
23.6 

88.0
–
88.0

2,662.4
–
2,662.4

669.3
–
669.3

4,061.9
–
4,061.9

7,176.5 
(340.2) 
6,836.3 

–
–
–

7,176.5
(340.2)
6,836.3

–
–

–

–
–

52.0
–

2.2
(49.5)

77.8
(49.5)

354.7 
(49.5) 

(30.0)
–

324.7
(49.5)

52.0

(47.3)

28.3

305.2 

(30.0)

275.2

–
52.0

–
(47.3)

–
28.3

0.7 
305.9 

–
(30.0)

0.7
275.9

14.4
(27.7)
262.6
(79.7)
182.9

Net finance costs of £13.3m are not allocated to individual segments.  

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Notes to the financial statements continued 

1 Segmental analysis continued 

2015 

Segment assets and liabilities  
Segment assets  

Other current assets  
Non-current assets  
Segment liabilities  

Other liabilities  
Net assets  

 Australasia
£m 

 Europe
£m 

 North Asia 
£m 

 South Asia 
£m 

 United 
Kingdom  
£m 

 Emerging 
Markets 
£m 

 Distribution 

 Total 
Distribution
£m 

90.9

128.0

157.2

126.5

40.6 

173.8 

717.0

(218.6)

(102.1)

(123.3)

(109.6)

(50.2) 

(140.8)

(744.6)

Segment assets include net inventory, receivables and derivative assets. Segment liabilities include payables, provisions and  
derivative liabilities. 

2015 

Other segment items  
Capital expenditure:  
– Property, plant and equipment  
– Interest in leased vehicles  
– Intangible assets  
Depreciation:  
– Property, plant and equipment  
– Interest in leased vehicles  
Amortisation of intangible assets  
Goodwill impairment 
Net provisions charged / (credited)  
to the consolidated income statement 

 Australasia 
£m 

 Europe 
£m 

 North Asia 
£m 

 South Asia 
£m 

 Distribution 

 United 
Kingdom  
£m 

 Emerging 
Markets  
£m 

 Total 
Distribution 
£m 

1.9
–
2.4

2.6
–
0.4
–

6.3

0.5
0.1
0.5

0.7
0.2
0.7
–

4.5

3.8
13.7
1.6

3.0
3.7
2.0
–

1.5

9.1
–
0.7

2.3
–
1.3
–

5.2

0.1 
6.7 
0.1 

0.2 
4.6 
0.2 
– 

(0.1) 

6.5 
8.8 
0.2 

4.4 
1.2 
0.2 
– 

1.7 

21.9
29.3
5.5

13.2
9.7
4.8
–

19.1

Net provisions include inventory, trade receivables impairment and other liability provisions. 

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2015 

Segment assets and liabilities  
Segment assets  

Other current assets  
Non-current assets  
Segment liabilities  

Other liabilities  
Net assets  

 Australasia 
£m 

 Europe 
£m 

 United 
Kingdom 
£m 

 Emerging 
Markets  
£m 

Retail 

 Total 
Retail 
£m 

 Total 
£m 

115.5

16.7

639.1

127.4 

898.7

1,615.7

(115.4)

(12.1)

(637.4)

(86.4) 

(851.3)

600.5
1,212.1
(1,595.9)

(590.5)
1,241.9

Segment assets include net inventory, receivables and derivative assets. Segment liabilities include payables, provisions and  
derivative liabilities. 

2015 

Other segment items  
Capital expenditure:  
– Property, plant and equipment  
– Interest in leased vehicles  
– Intangible assets  
Depreciation:  
– Property, plant and equipment  
– Interest in leased vehicles  
Amortisation of intangible assets  
Goodwill impairment 
Net provisions charged / (credited)  
to the consolidated income statement 

 Australasia  
£m 

 Europe 
£m 

 United 
Kingdom 
£m 

 Emerging 
Markets
£m 

 Retail 

 Total 
Retail 
£m 

 Total pre 
Central  
£m 

 Central 
£m 

 Total 
£m 

0.7 
– 
0.1 

1.7 
– 
– 
– 

10.3 

0.4
–
0.1

0.7
–
–
–

0.4

11.5
–
2.7

12.0
–
5.0
–

22.9

5.2
5.2
2.0

6.6
0.1
3.2
49.5

17.8
5.2
4.9

21.0
0.1
8.2
49.5

39.7 
34.5 
10.4 

34.2 
9.8 
13.0 
49.5 

0.1
–
8.8

0.3
–
1.0
–

39.8
34.5
19.2

34.5
9.8
14.0
49.5

1.2

34.8

53.9 

(1.3)

52.6

Net provisions include inventory, trade receivables impairment and other liability provisions. 

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97 
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Notes to the financial statements continued 

1 Segmental analysis continued 

2014 

Revenue 
Total revenue  
Inter-segment revenue  
Revenue from third parties  

Results  
Segment result  
Operating exceptional items  
Operating profit / (loss) after  
exceptional items  
Share of loss after tax of joint ventures 
and associates  
Profit / (loss) before finance and tax  

Finance income  
Finance costs  
Profit before tax  
Tax  
Profit for the year  

 Australasia 
£m 

 Europe 
£m 

 North Asia 
£m 

 South Asia
£m 

748.8
(182.1)
566.7

658.2
(150.4)
507.8

600.3
–
600.3

64.3
–

64.3

–
64.3

20.5
–

20.5

(1.9)
18.6

66.9
–

66.9

–
66.9

439.3
–
439.3

58.7
–

58.7

–
58.7

 United 
Kingdom  
£m 

 Emerging 
Markets
£m 

Distribution 

 Total 
Distribution 
£m 

51.4 
– 
51.4 

10.4 
– 

446.7
(28.1)
418.6

2,944.7
(360.6)
2,584.1

40.0
–

260.8
–

10.4 

40.0

260.8

– 
10.4 

–
40.0

(1.9)
258.9

The segment result in South Asia includes a profit of £17.3m on the sale of a property.  

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1 Segmental analysis continued 

2014 

Revenue 
Total revenue  
Inter-segment revenue  
Revenue from third parties  

Australasia 
£m 

 Europe 
£m 

 United 
Kingdom
£m 

 Emerging 
Markets
£m 

Retail 

 Total 
Retail 
£m 

 Total pre 
Central  
£m 

 Central
£m 

 Total
£m 

676.7 
– 
676.7 

122.1
–
122.1

2,421.4
–
2,421.4

898.4
–
898.4

4,118.6
–
4,118.6

7,063.3 
(360.6) 
6,702.7 

–
–
–

7,063.3
(360.6)
6,702.7

Results  
Segment result  
Operating exceptional items  
Operating profit / (loss) after  
exceptional items  
Share of loss after tax of joint ventures 
and associates  
Profit / (loss) before finance and tax  

25.0 
– 

25.0 

– 
25.0 

0.3
–

0.3

–
0.3

Finance income  
Finance costs  
Profit before tax  
Tax  
Profit for the year  

54.8
–

3.7
(47.4)

83.8
(47.4)

344.6 
(47.4) 

(26.2)
–

318.4
(47.4)

54.8

(43.7)

36.4

297.2 

(26.2)

271.0

–
54.8

–
(43.7)

–
36.4

(1.9) 
295.3 

–
(26.2)

(1.9)
269.1

14.8
(28.1)
255.8
(68.6)
187.2

Central costs include a past service pension credit of £7.2m (net of costs). 

Net finance costs of £13.3m are not allocated to individual segments.  

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Notes to the financial statements continued 

1 Segmental analysis continued 

2014 

Segment assets and liabilities  
Segment assets  

Other current assets  
Non-current assets  
Segment liabilities  

Other liabilities  
Net assets  

 Australasia
£m 

 Europe
£m 

 North Asia 
£m 

 South Asia 
£m 

 United 
Kingdom  
£m 

 Emerging 
Markets 
£m 

 Distribution 

 Total 
Distribution
£m 

60.5

107.0

121.9

83.9

41.4 

153.3 

568.0

(193.5)

(88.9)

(105.6)

(69.8)

(54.9) 

(119.7)

(632.4)

Segment assets include net inventory, receivables and derivative assets. Segment liabilities include payables, provisions and  
derivative liabilities. 

2014 

Other segment items  
Capital expenditure:  
– Property, plant and equipment  
– Interest in leased vehicles  
– Intangible assets  
Depreciation:  
– Property, plant and equipment  
– Interest in leased vehicles  
Amortisation of intangible assets  
Goodwill impairment 
Net provisions charged to the consolidated 
income statement 

 Australasia 
£m 

 Europe 
£m 

 North Asia 
£m 

 South Asia 
£m 

 United 
Kingdom  
£m 

 Emerging 
Markets  
£m 

 Distribution 

 Total 
Distribution 
£m 

3.9
–
1.0

2.8
–
0.6
–

2.3

0.3
–
0.8

0.8
0.6
0.5
–

2.6

1.8
7.7
1.4

2.8
2.5
0.4
–

0.5

4.5
–
1.0

2.2
–
1.0
–

2.7

0.1 
7.2 
0.2 

0.2 
5.8 
0.2 
– 

0.8 

7.8 
8.0 
0.7 

3.7 
1.1 
– 
– 

0.5 

18.4
22.9
5.1

12.5
10.0
2.7
–

9.4

Net provisions include inventory, trade receivables impairment and other liability provisions. 

100 
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Inchcape plc Annual Report and Accounts 2015 
Inchcape Annual Report and Accounts 2015

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Segmental analysis continued 

2014 

Segment assets and liabilities  
Segment assets  

Other current assets  
Non-current assets  
Segment liabilities  

Other liabilities  
Net assets  

 Australasia 
£m 

 Europe 
£m 

 United 
Kingdom 
£m 

 Emerging 
Markets  
£m 

Retail 

 Total 
Retail 
£m 

 Total 
£m 

132.7

12.7

477.8

121.4 

744.6

1,312.6

(135.5)

(13.0)

(494.6)

(86.3) 

(729.4)

642.9
1,313.0
(1,361.8)

(588.6)
1,318.1

Segment assets include net inventory, receivables and derivative assets. Segment liabilities include payables, provisions and  
derivative liabilities. 

2014 

Other segment items  
Capital expenditure:  
– Property, plant and equipment  
– Interest in leased vehicles  
– Intangible assets  
Depreciation:  
– Property, plant and equipment  
– Interest in leased vehicles  
Amortisation of intangible assets  
Goodwill impairment 
Net provisions charged to the 
consolidated income statement 

 Australasia  
£m 

 Europe 
£m 

 United 
Kingdom 
£m 

 Emerging 
Markets
£m 

0.3 
– 
0.4 

1.9 
– 
– 
– 

8.1 

0.5
–
–

0.7
–
–
–

0.2

32.7
–
4.0

10.8
–
3.1
–

19.6

4.9
–
2.5

9.0
0.1
3.5
47.4

1.7

Retail 

 Total 
Retail 
£m 

38.4
–
6.9

22.4
0.1
6.6
47.4

29.6

Net provisions include inventory, trade receivables impairment and other liability provisions. 

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 Total pre 
Central  
£m 

 Central 
£m 

 Total 
£m 

S
T
A
T
E
M
E
N
T
S

56.8 
22.9 
12.0 

34.9 
10.1 
9.3 
47.4 

39.0 

1.1
–
9.0

0.1
–
0.1
–

0.7

57.9
22.9
21.0

35.0
10.1
9.4
47.4

39.7

www.inchcape.com 

101 
inchcape.com 101

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
 £m 

(49.5)
(49.5)
(4.8)
(54.3)

2014 
 £m 

(47.4)
(47.4)
–
(47.4)

2015  
£m  

6,300.3 
536.0 
6,836.3 

2014 
£m 

6,159.5
543.2
6,702.7

Notes to the financial statements continued 

2 Exceptional items 

Goodwill impairment (see note 11) 
Total exceptional items before tax 
Exceptional tax (see note 8) 
Total exceptional items 

3 Revenue and expenses  
a. Revenue  
An analysis of the Group’s revenue for the year is as follows:  

Sale of goods  
Provision of services  

b. Analysis of net operating expenses  

Distribution costs  
Administrative expenses 
Other operating (income) / expense 

Net operating 
expenses before 
exceptional 
items 
2015
 £m 

 Exceptional 
items 
2015
 £m 

364.6
302.5
(3.0)
664.1

–
–
49.5
49.5

 Net 
operating 
expenses 
2015
 £m 

364.6
302.5
46.5
713.6

 Net operating 
expenses before 
exceptional  
items  
2014 
 £m 

 Exceptional 
items  
2014 
 £m 

362.3 
300.9 
(28.0) 
635.2 

– 
– 
47.4 
47.4 

 Net 
operating 
expenses 
2014
 £m 

362.3
300.9
19.4
682.6

Other operating expenses in 2015 includes £49.5m relating to goodwill impairment (2014 – £47.4m). 

Other operating income in 2014 includes a £17.3m profit on the disposal of a property in South Asia and a £7.2m pension 
credit (net of costs) in Central. 

c. Profit before tax is stated after the following charges / (credits):  

Depreciation of tangible fixed assets: 
– Property, plant and equipment  
– Interest in leased vehicles  
Amortisation of intangible assets 
Goodwill impairment 
Impairment of trade receivables 
Profit on sale of property, plant and equipment 
Operating lease rentals  

2015 
 £m 

34.5 
9.8 
14.0 
49.5 
2.3 
(2.1)
53.3 

2014
 £m 

35.0
10.1
9.4
47.4
0.9
(17.6)
51.4

102 
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Inchcape Annual Report and Accounts 2015

 
 
 
 
 
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3 Revenue and expenses continued 
d. Auditors’ remuneration 
During the year the Group (including its overseas subsidiaries) obtained the following services from the Group’s auditors at costs 
as detailed below:  

Audit services:  
Fees payable to the Company’s auditors and its associates for the audit of the parent Company and 
the consolidated financial statements  
Fees payable to the Company’s auditors and its associates for other services:  
– The audit of the Company’s subsidiaries  
– Audit related assurance services  
– Tax advisory services  
– Tax compliance services  
– All other services  
Total fees payable to PricewaterhouseCoopers  

Audit fees – firms other than PricewaterhouseCoopers  

e. Staff costs 

Wages and salaries  
Social security costs  
Other pension costs  
Share-based payment charge 

 2015 
£m  

2014
£m 

0.5 

1.6 
0.1 
0.2 
0.2 
0.1 
2.7 

0.1 

0.6

1.5
0.1
0.5
0.3
0.1
3.1

0.2

 2015 
£m  

409.1 
38.9 
16.4 
9.6 
474.0 

 2014
£m 

400.1
41.4
13.7
9.5
464.7

Other pension costs correspond to the current service charge and contributions to the defined contribution schemes  
(see note 5). 

Information on Directors’ emoluments and interests which forms part of these audited consolidated financial statements  
is given in the Directors’ Report on Remuneration which can be found on pages 63 to 77 of this document. Information on 
compensation of key management personnel is set out in note 31b. 

f. Average monthly number of employees 

Australasia 
Europe 
North Asia 
South Asia 
United Kingdom  
Emerging Markets 
Total operational 
Central 

2015
Number 

423
258
1,588
962
201
1,800
5,232

Distribution 

2014
Number 

488
272
1,511
943
197
1,720
5,131

2015
Number 

1,064
310
–
–
5,177
2,611
9,162

Retail   

2014 
Number    

1,209   
261   
–   
–   
4,946   
2,894   
9,310   

2015 
Number  

1,487 
568 
1,588 
962 
5,378 
4,411 
14,394 
129 
14,523 

Total 

2014
Number 

1,697
533
1,511
943
5,143
4,614
14,441
129
14,570

www.inchcape.com 

103 
inchcape.com 103

 
 
 
 
 
   
 
   
 
 
Notes to the financial statements continued 

4 Share-based payments 
The terms and conditions of the Group’s share-based payment plans are detailed in the Directors’ Report on Remuneration.  

The charge arising from share-based payment transactions during the year was £9.6m (2014 – £9.5m), all of which was  
equity-settled.  

The Other Share Plans disclosures below include other share-based incentive plans for senior executives and employees. 

The following table sets out the movements in the number of share options and awards during the year: 

2015 

Outstanding at 1 January 
Granted 
Exercised 
Lapsed 
Outstanding at 31 December  

Exercisable at 31 December  

2014 

Outstanding at 1 January 
Granted 
Exercised 
Lapsed 
Outstanding at 31 December  

Exercisable at 31 December  

Weighted average 
 exercise price* 

Performance 
Share Plan 

Executive Share 
Option Plan 

Save As You  
Earn Plan 

Other 
Share Plans 

£3.81
£4.82
£2.98
£4.84
£4.51

£2.27

6,894,702
1,626,284
(1,614,721)
(1,997,274)
4,908,991

886,411 
– 
(496,234) 
– 
390,177 

2,159,578 
1,014,035 
(730,746) 
(294,376) 
2,148,491 

1,269,799
605,212
(576,386)
(108,348)
1,190,277

259,213

390,177 

41,229 

27,833

Weighted average 
 exercise price* 
£3.24 
£5.40 
£3.04 
£3.88 
£3.81 
£2.56 

Performance
Share Plan 

Executive Share 
Option Plan 

6,683,773
2,266,778
(1,207,341)
(848,508)
6,894,702

2,849,628 
– 
(1,927,162) 
(36,055) 
886,411 

Save As You 
 Earn Plan 

2,279,654 
663,500 
(495,426) 
(288,150) 
2,159,578 

Other 
Share Plans 

1,705,704
293,346
(569,058)
(160,193)
1,269,799

226,302

886,411 

28,682 

20,285

* The weighted average exercise price excludes nil cost awards made under the Performance Share Plan and Other Share Plans. 

The weighted average remaining contractual life for the awards outstanding at 31 December 2015 is 2.4 years  
(2014 – 2.3 years). 

The range of exercise prices for options outstanding at the end of the year was £0.10 to £5.78 (2014 – £2.00 to £6.03). See  
note 24 for further details.  

The fair value of options granted under the Save As You Earn Plan and Other Share Plans is estimated as at the date of  
grant using a Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were 
granted. The fair value of nil cost awards granted under the Performance Share Plan and Other Share Plans is the market value 
of the related shares at the time of grant. The following table lists the main inputs to the model for awards granted during the 
years ended 31 December 2015 and 31 December 2014: 

Weighted average share price at grant date 
Weighted average share price at date  
of exercise 
Weighted average exercise price* 
Vesting period 
Expected volatility 
Expected life of award 
Weighted average risk free rate 
Expected dividend yield 
Weighted average fair value per option 

Performance

 Share Plan   

Save As You 

 Earn Plan   

2015 

£8.28

2014   

£6.31

2015 

£7.06

2014   

£6.81   

2015 

£8.07 

£8.31
n/a
3.0 years
n/a
3.0 years
n/a
n/a
£8.28

£6.43
n/a
3.0 years
n/a
3.0 years
n/a
n/a
£6.31

£7.94
£5.78
3.0 years
23.3%
3.2 years
0.8%
2.9%
£1.44

£6.80   
£5.40   
3.0 years   
31.7%   
3.2 years   
1.4%   
2.6%   
£1.89 

£8.17 
£0.10 
2.6 years 
42.8% 
3.9 years 
1.2% 
n/a 
£8.04 

Other
 Share Plans 

2014 

£6.27

£6.44
n/a
3.0 years
n/a
3.0 years
n/a
n/a
£6.27

* The weighted average exercise price excludes nil cost awards made under the Performance Share Plan and Other Share Plans. 

No options were granted under the Executive Share Option Plan in 2015 or 2014. 

The expected life and volatility of the options are based upon historical data. 

104 
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Inchcape Annual Report and Accounts 2015

 
   
   
 
 
 
 
 
 
 
 
 
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5 Pensions and other post-retirement benefits 
The Group operates a number of pension and post-retirement benefit schemes for its employees in a number of its businesses,  
primarily in the UK. 

a. UK schemes: benefits, governance, cash flow obligations and investments 
The Group operates three main defined benefit final salary pension schemes in the UK which are all closed to new employees 
and largely closed to future benefit accrual. The schemes are the Inchcape Motors Pension Scheme (comprising the Group, 
Motors, Normand and Cash+ sections), the Inchcape Overseas Pension Scheme and the TKM Group Pension Scheme. Cash+ is 
a defined benefit cash balance scheme which is designed to meet regulatory requirements for auto-enrolment legislation.  

Benefit structure 
Final salary schemes provide benefits to members in the form of a guaranteed level of pension payable for life. The level of 
benefits provided depends on final salary at retirement (or leaving date, if earlier) and length of service. The Group underwrites 
investment, mortality and inflation risks necessary to meet the obligations under the schemes. In the event of poor returns, 
increased life expectancy or higher than expected inflation, the Group is required to address any shortfall through a 
combination of an increase in contributions or by making appropriate adjustments to the schemes. 

Cash balance schemes like Cash+ allow members to accrue a percentage of their earnings each year, which then grows to 
provide a lump sum payment on retirement. Members have accrued benefits under this scheme with effect from 1 January 
2013. The Group underwrites the investment risk to normal retirement age (65), but all inflation and mortality risks associated 
with benefits are borne solely by the members. 

Governance 
Our UK schemes are registered with HMRC and comply fully with the regulatory framework published by the UK  
Pensions Regulator.  

Benefits are paid to members from separate funds administered by an independent trustee company (the Trustee) appointed 
by the Group. The Trustee is required to act in the best interest of the members, and is responsible for making funding and 
investment decisions in conjunction with the Group. 

The Group also has some minor unfunded arrangements relating to post-retirement health and medical plans in respect of  
past employees. There are no material defined contribution schemes in the UK. 

Scheme specific cash obligation / investment detail 
Inchcape Motors Pension Scheme 
Group and Motors Sections (closed sections) 
The latest actuarial valuations for these sections were carried out at 5 April 2013 on a market related basis and determined  
in accordance with the advice of independent professionally qualified actuaries based on the projected unit credit method. 
The actuarial valuation determined that the duration of the liabilities was approximately 18 years and that a small surplus 
existed on a prudent funding basis. The Group contributes £0.5m p.a. towards the administrative costs of running the  
scheme and no further review is scheduled until April 2016.  

Each section’s investment strategy sees it holding a proportion of its assets in matching assets (75% for the Group section and 
40% for the Motors section) with the remainder in growth assets. The matching assets are invested in a liability driven investment 
solution complemented with absolute return bonds. They are designed to hedge inflation and interest rate risk in a capitally 
efficient manner. The growth assets are invested in assets that are expected to grow at rates significantly faster than each 
sections’ liabilities and include diversified growth funds and property. 

Normand Section (closed section) 
Following the merger into the Inchcape Motors Pension Scheme, an actuarial valuation for this section was carried out at  
5 April 2015 on a market related basis and determined in accordance with the advice of independent professionally qualified 
actuaries based on the projected unit credit method. The actuarial valuation determined that the duration of the liabilities was 
approximately 17 years and that the section was approximately 76% funded on a prudent funding basis. The Group contributes 
£0.4m p.a. towards the administrative costs of running the scheme and improving the funding ratio. It has been agreed that this 
amount will increase on a year-on-year basis. 

The investment strategy is to hold 60% in growth assets and 40% in matching assets. 

Cash+ Section 
This scheme is a defined benefit scheme under which members accrue benefits with effect from 1 January 2013. An interim 
valuation was carried out at 5 April 2013 which determined that the scheme was considered fully funded on a prudent basis. 
The Group contributes £0.2m p.a. towards the administrative costs of running the scheme and the next review is in April 2016. 

The investment strategy is to be 60% invested in diversified growth funds which are designed to grow at a rate significantly  
faster than the liabilities, whilst spreading investment risk across a broad spectrum of asset classes. The remaining 40% is to  
be allocated to absolute return bonds. 

www.inchcape.com 

105 
inchcape.com 105

 
 
 
 
Notes to the financial statements continued 

5 Pensions and other post-retirement benefits continued 
Inchcape Overseas Pension Scheme 
This scheme is managed from Guernsey and is subject to most UK regulations. It is therefore reported under the United  
Kingdom in this note. The latest triennial actuarial valuation for this scheme was carried out at 31 March 2012 and determined  
in accordance with the advice of independent professionally qualified actuaries based on the projected unit credit method. 
The actuarial valuation determined that the duration of the liabilities was approximately 13 years and that the scheme was 
approximately 92% funded on a prudent funding basis. The Group contributes £0.5m p.a. towards the administrative costs of 
running the scheme and improving the funding ratio. A review as at 31 March 2015 is in progress but has not been completed. 

Investments are held in a balanced portfolio of equities and bonds. 

TKM Group Pension Scheme (closed scheme) 
The latest triennial actuarial valuation for this closed scheme was carried out at 5 April 2013 on a market related basis and 
determined in accordance with the advice of independent professionally qualified actuaries based on the projected unit  
credit method. The actuarial valuation determined that the duration of the liabilities was approximately 12 years and that the 
scheme was considered fully funded on a prudent basis. No cash contributions were required by the Group and the next review 
is scheduled for April 2016.  

In November 2015, the trustees of the TKM Group Pension Scheme completed a buy-in transaction whereby the assets of the 
scheme were used to acquire a bulk purchase annuity policy with Aviva under which the benefits payable to the members  
of the scheme are now fully insured. The insurance policy was purchased using the existing assets of the scheme with no 
additional funding required from the Group. The insurance policy has been structured to enable the scheme, in time, to  
move to full buy-out, following which Aviva will become directly responsible for the pension payments under the scheme. As at 
31 December 2015, the bulk purchase annuity policy has been accounted for as an asset of the scheme and valued on the 
same basis as the liabilities that it matches. The difference between the cost of the annuity and the value of the associated 
liabilities of approximately £48m has been accounted for as an experience loss within other comprehensive income. 

b. Overseas schemes 
There are a number of smaller defined benefit schemes overseas, the most significant being the Inchcape Motors Limited 
Retirement Scheme in Hong Kong. In general these schemes offer a lump sum on retirement with no further obligation to  
the employee and assets are held in trust in separately administered funds. These schemes are typically subject to triennial 
valuations. The overseas defined contribution schemes are principally linked to local statutory arrangements. 

c. Defined contribution plans 
The total expense recognised in the consolidated income statement is £4.6m (2014 – £5.6m). There are outstanding 
contributions of £0.1m at the year end (2014 – £nil). 

d. Defined benefit plans 
As the Group’s principal defined benefit schemes are in the UK, these have been reported separately from the overseas 
schemes. For the purposes of reporting, actuarial updates have been obtained for the Group’s material schemes and these 
updates are reflected in the amounts reported in the following tables.  

106 
106

Inchcape plc Annual Report and Accounts 2015 
Inchcape Annual Report and Accounts 2015

5 Pensions and other post-retirement benefits continued 
The principal weighted average assumptions used by the actuaries were: 

Rate of increase in salaries 
Rate of increase in pensions 
Discount rate 
Rate of inflation:  
– Retail price index 
– Consumer price index 

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United Kingdom   

Overseas 

2015
% 

3.6
3.1
3.9

3.1
2.1

2014 

%   

3.6   
3.1   
3.5   

3.1   
2.1   

2015 
% 

3.8 
2.3 
1.7 

2.5 
n/a 

2014
% 

3.8
2.3
2.1

2.5
n/a

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The rate of increase in healthcare costs is 5.4% (2014 – 5.5%) per annum. 

Assumptions regarding future mortality experience are set based on published statistics and experience. For the UK schemes, 
the average life expectancy of a pensioner retiring at age 65 is 23.9 years (2014 – 23.8 years) for current pensioners and 25.7 
years (2014 – 25.6 years) for current non pensioners. Most of the overseas schemes only offer a lump sum on retirement and 
therefore mortality assumptions are not applicable. 

The asset / (liability) recognised in the consolidated statement of financial position is determined as follows: 

United Kingdom 

Overseas   

Present value of funded obligations 
Fair value of plan assets 
Net surplus / (deficit) in funded obligations 
Present value of unfunded obligations 

The net pension asset is analysed as follows:  

Schemes in surplus 
Schemes in deficit 

2015
£m 

(887.1)
996.2
109.1
(0.7)
108.4

2014
£m 

(953.1)
1,077.3
124.2
(0.9)
123.3

123.9
(15.5)
108.4

147.4
(24.1)
123.3

2015
£m 

(48.9)
40.5
(8.4)
(1.1)
(9.5)

0.4
(9.9)
(9.5)

2014 

£m   

(43.4)  
40.5   
(2.9)  
(1.1)  
(4.0)  

2015 
£m 

(936.0)
1,036.7 
100.7 
(1.8)
98.9 

0.4   
(4.4)  
(4.0)  

124.3 
(25.4)
98.9 

The amounts recognised in the consolidated income statement are as follows: 

Current service cost 
Past service credit 
Scheme expenses 
Interest expense on plan liabilities 
Interest income on plan assets  

United Kingdom 

Overseas   

2015
£m 

(9.1)
–
(1.9)
(32.5)
36.8
(6.7)

2014
£m 

(5.9)
7.3
(2.5)
(37.0)
42.1
4.0

2015
£m 

(2.7)
–
(0.1)
(0.8)
0.7
(2.9)

2014 

£m   

(2.2)  
–   
(0.1)  
(0.9)  
0.9   
(2.3)  

2015 
£m 

(11.8)
– 
(2.0)
(33.3)
37.5 
(9.6)

Total 

2014
£m 

(996.5)
1,117.8
121.3
(2.0)
119.3

147.8
(28.5)
119.3

Total 

2014
£m 

(8.1)
7.3
(2.6)
(37.9)
43.0
1.7

In 2014, the past service credit of £7.3m (£7.2m net of associated costs) arose from ongoing initiatives to mitigate the volatility 
associated with the Group’s defined benefit obligations. These initiatives included changes to pensions in payment and to 
benefits available to members at retirement. 

www.inchcape.com 

107 
inchcape.com 107

 
 
   
 
 
 
 
 
   
 
   
 
 
 
 
 
 
 
Notes to the financial statements continued 

5 Pensions and other post-retirement benefits continued 
The amounts recognised in the consolidated statement of comprehensive income are as follows: 

Actuarial gains / (losses) on liabilities: 
– Experience gains and (losses) 
– Changes in financial assumptions 
Actuarial (losses) / gains on assets: 
– Experience (losses) and gains 

United Kingdom 

Overseas   

2015
£m 

2014
£m 

2015
£m 

2014 

£m   

2015
£m 

Total 

2014
£m 

8.0
56.3

(0.9)
(89.4)

(80.0)
(15.7)

94.4
4.1

(1.5)
(1.6)

(1.0)
(4.1)

(0.3)  
(1.9)  

0.6   
(1.6)  

6.5
54.7

(1.2)
(91.3)

(81.0)
(19.8)

95.0
2.5

In 2015, investment management expenses of £7.0m (2014 – £nil) were borne by the Group on behalf of UK schemes and have 
been recognised in the consolidated statement of other comprehensive income. 

Analysis of the movement in the net asset / (liability): 

At 1 January 
Amount recognised in the consolidated income statement 
Contributions by employer 
Actuarial (losses) / gains recognised in the year 
Effect of foreign exchange rates 
At 31 December 

United Kingdom 

Overseas   

2015
£m 

123.3
(6.7)
7.5
(15.7)
–
108.4

2014
£m 

107.8
4.0
7.4
4.1
–
123.3

2015
£m 

(4.0)
(2.9)
1.6
(4.1)
(0.1)
(9.5)

2014 

£m   

(1.8)  
(2.3)  
1.7   
(1.6)  
–   
(4.0)  

Changes in the present value of the defined benefit obligation are as follows: 

At 1 January 
Current service cost 
Past service credit 
Interest expense on plan liabilities 
Actuarial gains / (losses):  
– Experience gains and (losses) 
– Changes in financial assumptions 
Contributions by employees 
Benefits paid  
Plan settlements 
Effect of foreign exchange rate changes 
At 31 December 

United Kingdom 

Overseas   

2015
£m 

(954.0)
(9.1)
–
(32.5)

8.0
56.3
(0.1)
43.6
–
–
(887.8)

2014
£m 

(871.1)
(5.9)
7.3
(37.0)

(0.9)
(89.4)
(0.1)
42.1
1.0
–
(954.0)

2015
£m 

(44.5)
(2.7)
–
(0.8)

(1.5)
(1.6)
–
3.0
–
(1.9)
(50.0)

2014 

£m   

(39.9)  
(2.2)  
–   
(0.9)  

(0.3)  
(1.9)  
–   
2.6   
–   
(1.9)  
(44.5)  

2015
£m 

119.3
(9.6)
9.1
(19.8)
(0.1)
98.9

2015
£m 

(998.5)
(11.8)
–
(33.3)

6.5
54.7
(0.1)
46.6
–
(1.9)
(937.8)

Total 

2014
£m 

106.0
1.7
9.1
2.5
–
119.3

Total 

2014
£m 

(911.0)
(8.1)
7.3
(37.9)

(1.2)
(91.3)
(0.1)
44.7
1.0
(1.9)
(998.5)

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5 Pensions and other post-retirement benefits continued 
Changes in the fair value of the defined benefit asset are as follows: 

At 1 January 
Interest income on plan assets 
Scheme expenses 
Actuarial (losses) / gains:  
– Experience (losses) and gains 
Contributions by employer 
Contributions by employees 
Benefits paid 
Plan settlements 
Effect of foreign exchange rate changes 
At 31 December 

United Kingdom 

Overseas   

2015
£m 

1,077.3
36.8
(1.9)

(80.0)
7.5
0.1
(43.6)
–
–
996.2

2014
£m 

978.9
42.1
(2.5)

94.4
7.4
0.1
(42.1)
(1.0)
–
1,077.3

2015
£m 

40.5
0.7
(0.1)

(1.0)
1.6
–
(3.0)
–
1.8
40.5

2014 

£m   

38.1   
0.9   
(0.1)  

0.6   
1.7   
–   
(2.6)  
–   
1.9   
40.5   

2015 
£m 

1,117.8 
37.5 
(2.0)

(81.0)
9.1 
0.1 
(46.6)
– 
1.8 
1,036.7 

At the end of the reporting period, the percentage of the plan assets by category had been invested as follows: 

Equities (quoted) 
Corporate bonds (quoted) 
Government bonds (quoted) 
Diversified growth funds (quoted) 
Other (quoted) 
Other (unquoted) 1 

United Kingdom 

Overseas   

2015 

2014 

2015 

2014   

2015 

4.8%
24.1%
0.1%
18.1%
3.0%
49.9%
100.0%

3.9%
25.9%
25.5%
20.3%
11.3%
13.1%
100.0%

75.6%
22.2%
–
–
0.1%
2.1%
100.0%

75.1%   
20.6%   
–   
–   
0.1%   
4.2%   
100.0%   

7.6% 
24.1% 
0.1% 
17.4% 
2.8% 
48.0% 
100.0% 

The fair value of the Group’s own equity held within plan assets is £nil (2014 – £nil).  

1. Other unquoted plan assets include annuity policies. 

Total 

2014
£m 

1,017.0
43.0
(2.6)

95.0
9.1
0.1
(44.7)
(1.0)
1.9
1,117.8

Total 

2014 

6.4%
25.7%
24.6%
19.6%
10.9%
12.8%
100.0%

www.inchcape.com 

109 
inchcape.com 109

 
 
   
 
 
 
 
 
  
 
 
 
Notes to the financial statements continued 

5 Pensions and other post-retirement benefits continued 
The following disclosures relate to the Group’s defined benefit plans only. 

e. Risk management 
Asset volatility 
Scheme liabilities are calculated on a discounted basis using a discount rate which is set with reference to corporate bond 
yields. If scheme assets underperform this yield, then this will create a deficit. The combined schemes hold approximately 75%  
of assets as defensive assets (liability driven investment solutions, absolute return bonds and annuity policies) which mitigate 
significant changes in yields, and active monitoring plans are in place to identify opportunities to increase the proportion of 
such assets further when economically possible. 

As the schemes mature, the Group reduces the level of investment risk by investing in defensive assets that are designed to 
better match the liabilities of the schemes. However, the Group believes that due to the long-term nature of the scheme 
liabilities, a level of continuing equity investment is an appropriate element of the long-term investment strategy. 

Inflation risk 
The majority of the Group’s defined benefit obligations are linked to inflation. Higher inflation will lead to higher liabilities, 
although in the majority of cases there are caps on the level of inflationary increases to be applied to pension obligations.  
The Group’s investment strategy across the schemes is to mitigate inflation risk through holding inflation-linked assets. 

Life expectancy 
The plans’ obligations are to provide a pension for the life of the member, so realised increases in life expectancy will result in an 
increase in the plans’ benefit payments. Future mortality rates cannot be predicted with certainty. All of the schemes conduct 
scheme-specific mortality investigations annually, to ensure the Group has a clear understanding of any potential increase in 
liability due to pensioners living for longer than assumed. The trustees of the scheme hedge this risk by adopting a prudent 
approach in their assumption for future improvements. 

f. Sensitivity analysis 
The disclosures above are dependent on the assumptions used. The table below demonstrates the sensitivity of the defined 
benefit obligation to changes in the assumptions used for the UK schemes. Changes in assumptions have an immaterial effect 
on the overseas schemes. 

Impact on the defined benefit obligation 

Discount rate -0.25% 
Discount rate +0.25% 
Inflation -0.25% 
Inflation +0.25% 
Life expectancy + 1 year 

United Kingdom 

2015 

%   

+3.9   
-3.7   
-3.3   
+3.5   
+3.5   

2014
% 

+4.2
-3.9
-3.4
+3.6
+3.3

The above analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is 
unlikely to occur, and changes in some of the assumptions may be correlated. The above variances have been used as they 
are believed to be reasonably possible fluctuations. 

g. Expected future cash flows 
The Group has agreed to pay approximately £2.0m to its defined benefit plans in 2016. The Group does not expect any material 
changes to the annual cash contributions over the next three years given the funding position of the largest schemes, which 
account for 90% of the Group’s total pension liabilities. 

The defined benefit obligations are based on the current value of expected benefit payment cash flows to members over  
the next several decades. The average duration of the liabilities is approximately 18 years for the UK schemes.  

110 
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6 Finance income 

Bank and other interest receivable 
Net interest income on post-retirement plan assets and liabilities 
Other finance income 
Total finance income 

7 Finance costs  

Interest payable on bank borrowings 
Interest payable on Private Placement  
Interest payable on other borrowings 
Fair value adjustment on Private Placement 
Fair value gain on cross currency interest rate swaps  
Stock holding interest (see note 20) 
Other finance costs 
Total finance costs 

2015  
£m 

3.1 
4.2 
7.1 
14.4 

2015  
£m 

1.7 
3.1 
0.3 
6.4 
(7.3)
18.4 
5.1 
27.7 

 2014
£m 

2.7
5.1
7.0
14.8

 2014
£m 

1.4
2.9
0.2
8.9
(10.4)
18.6
6.5
28.1

The Group capitalisation rate used for general borrowing costs in accordance with IAS 23 was a weighted average rate for the 
year of 2.0% (2014 – 2.0%). 

www.inchcape.com 

111 
inchcape.com 111

 
 
 
Notes to the financial statements continued 

8 Tax 

Current tax: 
– UK corporation tax 
– Overseas tax 

Adjustments to prior year liabilities: 
– UK 
– Overseas 
Current tax 
Deferred tax (note 16) 
Tax before exceptional tax 
Exceptional tax – deferred tax (notes 2 and 16) 
Total tax charge 

2015 
£m 

6.2 
73.1 
79.3 

– 
(0.6)
78.7 
(3.8)
74.9 
4.8 
79.7 

2014
£m 

–
66.5
66.5

–
(0.2)
66.3
2.3
68.6
–
68.6

The UK corporation tax charge is calculated upon net UK profit and after taking account of all relevant prior year losses  
and other deductions including pension contributions and capital allowances on plant and buildings. 

Factors affecting the tax expense for the year 
The effective tax rate for the year before the impact of exceptional items is 24.0%, the same as 2014 (excluding the tax free 
property gain of £17.3m in South Asia in that year). 

The weighted average tax rate is 24.3% (2014 – 24.0%). The weighted average tax rate comprises the average statutory rates 
across the Group, weighted in proportion to accounting profits and losses. 

The table below explains the differences between the expected tax expense at the weighted average tax rate and the  
Group’s total tax expense. 

Profit before tax  
Profit before tax multiplied by the weighted average tax rate of 24.3% (2014 – 24.0%) 
Effects of: 
– Permanent differences 
– Non-taxable income 
– Prior year items 
– Unrecognised deferred tax movement 
– Overseas tax audits and settlements 
– Taxes on undistributed earnings 
– Impact of impairment of intangible assets (Russia) 
– Impact of derecognition of deferred tax assets (Russia)  
– Tax free property gain in South Asia 
– Other items (including tax rate differentials) 
Total tax charge  

2015 
£m 

262.6 
63.8 

 2014
£m 

255.8
61.4

6.9 
(2.4)
(1.7)
(1.3)
– 
2.5 
9.9 
4.8 
– 
(2.8)
79.7 

0.5
(0.9)
(5.1)
(3.2)
8.3
1.9
9.5
–
(2.9)
(0.9)
68.6

The recognition of deferred tax assets, particularly in respect of tax losses, is based upon 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. The Group assesses the availability of future taxable 
profits based on historic performance and the forecasts for the Group’s operations as are used in the Group’s value in use 
calculations (see note 11). On this basis, the Directors have determined that net deferred tax assets in respect of tax losses in 
Russia should no longer be recognised, resulting in a deferred tax charge of £4.8m. More detail of the Group’s tax losses and 
deferred tax assets can be found in note 16. 

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9 Earnings per share 

Profit for the year 
Non-controlling interests 
Basic earnings 
Exceptional items  
Adjusted earnings 

Basic earnings per share 
Diluted earnings per share 
Basic Adjusted earnings per share 
Diluted Adjusted earnings per share 

Weighted average number of fully paid ordinary shares in issue during the year 
Weighted average number of fully paid ordinary shares in issue during the year: 
– Held by the Inchcape Employee Trust 
– Held in Treasury 
Weighted average number of fully paid ordinary shares for the purposes of basic EPS 
Dilutive effect of potential ordinary shares 
Adjusted weighted average number of fully paid ordinary shares in issue during the 
year for the purposes of diluted EPS 

 2015 
£m 

182.9 
(7.1) 
175.8 
54.3 
230.1 

39.8p 
39.4p 
52.1p 
51.6p 

2014
£m 

187.2
(7.6)
179.6
47.4
227.0

39.7p
39.0p
50.2p
49.3p

 2015 
number  

2014
number 

442,230,291 

455,975,201

(753,647) 
– 
441,476,644 
4,468,252 

(1,907,636)
(1,443,183)
452,624,382
7,959,690

445,944,896 

460,584,072

Basic earnings per share is calculated by dividing the Basic earnings for the year by the weighted average number of fully  
paid ordinary shares in issue during the year, less those shares held by the Inchcape Employee Trust and repurchased as  
part of the share buy back programme. 

Diluted earnings per share is calculated on the same basis as the Basic 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. 

Basic Adjusted earnings (which excludes exceptional 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 year by the 
weighted average number of fully paid ordinary shares in issue during the year, less those shares held by the Inchcape 
Employee Trust. 

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. 

www.inchcape.com 

113 
inchcape.com 113

 
 
 
 
 
 
Notes to the financial statements continued 

10 Dividends 
The following dividends were paid by the Group: 

Interim dividend for the six months ended 30 June 2015 of 6.8p per share  
(30 June 2014 – 6.3p per share) 
Final dividend for the year ended 31 December 2014 of 13.8p per share  
(31 December 2013 – 11.7p per share) 

2015 
£m 

30.0 

61.1 
91.1 

2014
£m 

28.5

53.0
81.5

A final proposed dividend for the year ended 31 December 2015 of 14.1p per share amounting to £61.0m is subject to approval 
by shareholders at the Annual General Meeting and has not been included as a liability as at 31 December 2015. 

11 Intangible assets 

Cost 
At 1 January 2014 
Additions 
Disposals 
Retirement of fully amortised assets not in use 
Effect of foreign exchange rate changes 
At 1 January 2015 
Businesses acquired (see note 28) 
Businesses sold 
Additions 
Retirement of fully amortised assets not in use 
Effect of foreign exchange rate changes 
At 31 December 2015 

Accumulated amortisation and impairment 
At 1 January 2014 
Amortisation charge for the year 
Disposals 
Impairment of goodwill 
Retirement of fully amortised assets not in use 
Effect of foreign exchange rate changes 
At 1 January 2015 
Amortisation charge for the year 
Impairment of goodwill 
Retirement of fully amortised assets not in use 
Effect of foreign exchange rate changes 
At 31 December 2015 

Net book value at 31 December 2015 

Net book value at 31 December 2014 

Goodwill
£m 

 Computer 
software 
£m  

 Other  
intangible  
assets 
£m  

586.6
–
–
–
(79.8)
506.8
4.0
(0.3)
–
–
(20.3)
490.2

(60.7)
–
–
(47.4)
–
3.9
(104.2)
–
(49.5)
–
8.8
(144.9)

345.3

402.6

107.1 
21.0 
(1.1) 
(1.3) 
(7.7) 
118.0 
– 
– 
19.2 
(2.9) 
(2.7) 
131.6 

(45.9) 
(9.4) 
1.0 
– 
1.3 
4.0 
(49.0) 
(14.0) 
– 
2.9 
1.6 
(58.5) 

73.1 

69.0 

0.2 
– 
– 
(0.2)
– 
– 
– 
– 
– 
– 
– 
– 

(0.2)
– 
– 
– 
0.2 
– 
– 
– 
– 
– 
– 
– 

– 

– 

 Total 
£m 

693.9
21.0
(1.1)
(1.5)
(87.5)
624.8
4.0
(0.3)
19.2
(2.9)
(23.0)
621.8

(106.8)
(9.4)
1.0
(47.4)
1.5
7.9
(153.2)
(14.0)
(49.5)
2.9
10.4
(203.4)

418.4

471.6

As at 31 December 2015, capitalised borrowing costs of £1.5m (2014 – £1.5m) were included within ‘computer software’, £nil  
of which was capitalised in 2015 (2014 – £nil). 

114 
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11 Intangible assets continued 
Goodwill 
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. These CGU groups represent the lowest level within the Group at which the associated goodwill is monitored  
for management purposes. Unless otherwise stated, the Group evaluates goodwill in CGU groupings at a country operation 
level, e.g. UK Retail, Australia Retail. 

The carrying amount of goodwill has been allocated to CGU groups within the following reporting segments: 

United Kingdom 
Emerging Markets 
South Asia 
Australasia 

2015 
£m 

266.1 
21.2 
19.4 
38.6 
345.3 

2014
£m 

262.1
79.6
19.7
41.2
402.6

I

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I

Goodwill is subject to impairment testing annually, or more frequently where there are indications that the goodwill may  
be impaired. Impairment tests were performed for all CGU groups during the year ended 31 December 2015.  

The recoverable amounts of all CGU groups were determined based on value in use calculations. These calculations use cash 
flow projections based on five-year financial forecasts prepared by management. The key assumptions for these forecasts are 
those relating to revenue growth, operating margins and the level of working capital required to support trading, which have 
been based on past experience, recent trading and expectations of future changes in the relevant markets. They also reflect 
expectations about continuing relationships with key brand partners. 

Cash flows after the five-year period are extrapolated at an estimated average long-term growth rate for each market. The 
growth rates used vary between 2% and 5% and are consistent with appropriate external sources for the relevant markets. 

Cash flows are discounted back to present value using a risk adjusted discount rate. The discount rates used are calculated  
as the Group’s weighted average cost of capital adjusted for a risk premium attributable to the relevant country. The pre-tax 
discount rates used vary between 10% and 13% and reflect long-term country risk. 

S
T
A
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E
M
E
N
T
S

www.inchcape.com 

115 
inchcape.com 115

 
 
 
Notes to the financial statements continued 

11 Intangible assets continued 
The assumptions used with regards to pre-tax discount rates and long-term growth rates in those reporting segments with 
material goodwill balances were as follows: 

United Kingdom 
Emerging Markets 
South Asia 
Australasia 

Discount rate 

10% 
10% to 13% 
10% 
11% 

Long-term 
growth rate 

2%
5%
2%
2%

Impairment 
In light of the sustained weaker trading conditions in Russia and the consequent time forecast before market recovery, the 
Directors have reviewed the carrying value of the goodwill in Russia and determined that an impairment charge of £49.5m 
(2014 – £47.4m) should be recognised, representing the full residual carrying value of goodwill in the business. The discount  
rate applied to the value in use calculation for Russia was 13.3% (2014 – 12.5%) and the long-term growth rate was 4.5%  
(2014 – 4.5%). 

Sensitivities 
The Group’s value in use calculations are sensitive to a change in the key assumptions used, most notably the discount rates 
and the long-term growth rates. With the exception of the Group’s businesses in Lithuania, a reasonably possible change in  
a key assumption will not cause a material impairment of goodwill in any of the other CGU groups. 

The Group’s goodwill in the Emerging Markets segment at 31 December 2015 is allocated as follows: 

Russia 
Latvia 
Lithuania 
Other 
At 31 December 2015 

Cost 
£m 

90.4 
38.8 
19.0 
2.4 
150.6 

Impairment 
provision 
£m 

Net book 
value
£m 

(90.4)
(38.8)
– 
(0.2)
(129.4)

–
–
19.0
2.2
21.2

The value in use calculations for the Group’s business in Lithuania currently exceed the carrying value by approximately 10%.  
A 0.5% increase in the discount rate or a 0.5% reduction in the long-term growth rate would eliminate the remaining headroom. 

116 
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12 Property, plant and equipment 

Cost 
At 1 January 2014 
Businesses sold 
Additions 
Disposals 
Transferred to inventory 
Retirement of fully depreciated assets not in use 
Reclassified to assets held for sale (note 19) 
Effect of foreign exchange rate changes 
At 1 January 2015 
Businesses acquired 
Businesses sold 
Additions 
Disposals 
Transferred to inventory 
Retirement of fully depreciated assets not in use 
Reclassified to assets held for sale (note 19) 
Reclassifications 
Effect of foreign exchange rate changes 
At 31 December 2015 

Accumulated depreciation and impairment 
At 1 January 2014 
Businesses sold 
Depreciation charge for the year 
Disposals 
Transferred to inventory 
Retirement of fully depreciated assets not in use 
Reclassified to assets held for sale (note 19) 
Effect of foreign exchange rate changes 
At 1 January 2015 
Businesses sold 
Depreciation charge for the year 
Disposals 
Transferred to inventory 
Retirement of fully depreciated assets not in use 
Reclassified to assets held for sale (note 19) 
Reclassifications 
Effect of foreign exchange rate changes 

At 31 December 2015 

Net book value at 31 December 2015 

Net book value at 31 December 2014 

Plant,
machinery 
and
equipment
£m 

Land and
buildings
£m 

Subtotal 
£m 

Interest 
in leased 
vehicles 
£m 

717.2
–
34.2
(8.3)
–
(0.7)
(17.6)
(65.1)
659.7
–
–
19.5
(6.4)
–
(0.5)
(6.7)
13.9
(20.3)
659.2

(117.3)
–
(13.4)
0.7
–
0.7
6.2
6.0
(117.1)
–
(14.3)
2.3
–
0.5
2.2
(7.3)
2.8

(130.9)

528.3

542.6

206.6
(0.9)
23.7
(14.5)
(1.2)
(4.2)
–
(10.3)
199.2
0.1
(1.4)
20.3
(4.4)
(0.6)
(0.5)
–
(13.9)
(5.0)
193.8

(123.1)
0.6
(21.6)
12.7
0.6
4.2
–
5.4
(121.2)
0.9
(20.2)
3.9
0.2
0.5
–
7.3
2.9

(125.7)

68.1

78.0

923.8 
(0.9) 
57.9 
(22.8) 
(1.2) 
(4.9) 
(17.6) 
(75.4) 
858.9 
0.1 
(1.4) 
39.8 
(10.8) 
(0.6) 
(1.0) 
(6.7) 
– 
(25.3) 
853.0 

(240.4) 
0.6 
(35.0) 
13.4 
0.6 
4.9 
6.2 
11.4 
(238.3) 
0.9 
(34.5) 
6.2 
0.2 
1.0 
2.2 
– 
5.7 

(256.6) 

596.4 

620.6 

74.9 
– 
22.9 
– 
(40.0)
– 
– 
(0.9)
56.9 
– 
– 
34.5 
– 
(25.1)
– 
– 
– 
0.2 
66.5 

(25.6)
– 
(10.1)
– 
15.6 
– 
– 
0.2 
(19.9)
– 
(9.8)
– 
10.9 
– 
– 
– 
(0.1)

(18.9)

47.6 

37.0 

Total
£m 

998.7
(0.9)
80.8
(22.8)
(41.2)
(4.9)
(17.6)
(76.3)
915.8
0.1
(1.4)
74.3
(10.8)
(25.7)
(1.0)
(6.7)
–
(25.1)
919.5

(266.0)
0.6
(45.1)
13.4
16.2
4.9
6.2
11.6
(258.2)
0.9
(44.3)
6.2
11.1
1.0
2.2
–
5.6

(275.5)

644.0

657.6

Certain subsidiaries have an obligation to repurchase, at a guaranteed residual value, vehicles which have been legally sold 
for leasing contracts. These assets are included in ‘interest in leased vehicles’ in the table above.  

www.inchcape.com 

117 
inchcape.com 117

 
 
 
 
 
 
 
Notes to the financial statements continued 

12 Property, plant and equipment continued 
Assets held under finance leases have the following net book values: 

Leasehold buildings 
Plant, machinery and equipment 

The book value of land and buildings is analysed between: 

Freehold 
Leasehold with over 50 years unexpired 
Short leasehold 

2015 
£m 

2.2 
– 
2.2 

2015 
£m 

362.1 
45.4 
120.8 
528.3 

2014
£m 

2.6
–
2.6

2014
£m 

397.1
32.3
113.2
542.6

As at 31 December 2015, £5.0m (2014 – £5.0m) of capitalised borrowing costs were included within ‘land and buildings’, £nil  
of which was capitalised in 2015 (2014 – £nil). 

2015
£m 

9.0
(4.0)
0.7
–
–
(0.4)
5.3

2015
£m 

–
5.6
5.6
(0.3)
–
(0.3)
5.3

1.0
(0.3)
0.7
–

2014
£m 

14.0
–
(1.9)
(0.2)
(2.2)
(0.7)
9.0

Total 

2014
£m 

0.2
27.9
28.1
(15.5)
(3.6)
(19.1)
9.0

1.3
(3.2)
(1.9)
–

13 Investments in joint ventures and associates 

At 1 January 
Disposals 
Share of profit / (loss) after tax of joint ventures and associates  
Share of other comprehensive loss of joint ventures and associates 
Dividends paid 
Effect of foreign exchange rate changes 
At 31 December  

Group’s share of net assets of joint ventures and associates 

Non-current assets  
Current assets 
Group’s share of gross assets 
Current liabilities 
Non-current liabilities 
Group’s share of gross liabilities 
Group’s share of net assets 

Group’s share of results of joint ventures and associates
Revenue 
Expenses 
Profit / (loss) before tax 
Tax 
Share of profit / (loss) after tax of joint ventures  
and associates  

Joint ventures 

Associates   

2015
£m 

–
5.6
5.6
(0.3)
–
(0.3)
5.3

0.1
(0.1)
–
–

2014
£m 

–
6.4
6.4
(1.7)
(0.3)
(2.0)
4.4

0.1
(0.1)
–
–

2015
£m 

–
–
–
–
–
–
–

0.9
(0.2)
0.7
–

2014 

£m   

0.2   
21.5   
21.7   
(13.8)  
(3.3)  
(17.1)  
4.6   

1.2   
(3.1)  
(1.9)  
–   

–

–

0.7

(1.9)  

0.7

(1.9)

As at 31 December 2015, no guarantees were provided in respect of joint ventures and associates borrowings (2014 – £nil). 

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14 Available for sale financial assets 

At 1 January  
Additions 
Disposals  
Fair value movement transferred to shareholders’ equity 
Effect of foreign exchange rate changes 
At 31 December 

Analysed as: 

Non-current 
Current 

Assets held are analysed as follows: 

Equity securities 
Other 

2015 
£m 

1.4 
– 
– 
– 
– 
1.4 

2015 
£m 

1.2 
0.2 
1.4 

2015 
£m 

0.4 
1.0 
1.4 

2014
£m 

9.7
0.6
(8.4)
(0.3)
(0.2)
1.4

2014
£m 

1.2
0.2
1.4

2014
£m 

0.4
1.0
1.4

‘Other’ includes debentures that are not subject to interest rates and do not have fixed maturity dates. They are valued by 
reference to traded market values. 

Available for sale financial assets, which are valued based on active markets’ prices, are reported under Level 1 in note 23 on  
financial instruments. 

www.inchcape.com 

119 
inchcape.com 119

 
 
 
 
Notes to the financial statements continued 

15 Trade and other receivables 

Trade receivables 
Less: provision for impairment of trade receivables 
Net trade receivables 
Prepayments and accrued income 
Other receivables 

Movements in the provision for impairment of receivables were as follows:  

At 1 January  
Charge for the year 
Amounts written off  
Unused amounts reversed 
Effect of foreign exchange rate changes 
At 31 December 

At 31 December, the analysis of trade receivables is as follows: 

2015
 £m 

196.8
(6.7)
190.1
97.5
40.2
327.8

Current   

2014 
 £m   

175.2   
(6.7)  
168.5   
91.1   
25.6   
285.2   

Non-current 

2014
 £m 

0.1
–
0.1
22.2
6.0
28.3

2014
 £m 

(8.4)
(0.9)
1.2
0.8
0.6
(6.7)

2015 
 £m  

– 
– 
– 
41.2 
6.0 
47.2 

2015 
 £m  

(6.7)
(2.3)
0.8 
1.1 
0.4 
(6.7)

2015 

2014 

Neither past 
due nor 
impaired
£m 

136.5

129.5

Total
£m 

196.8

175.3

 Past due but not impaired 

0 < 30 days
£m 

30 – 90 days 
£m 

> 90 days 
£m 

Impaired
£m 

32.6

21.1

14.3 

11.0 

6.7 

7.0 

6.7

6.7

Trade receivables are non-interest bearing and are generally on credit terms of 30 to 60 days. 

Management considers the carrying amount of trade and other receivables to approximate to their fair value. Long-term 
receivables have been discounted where the time value of money is considered to be material.  

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.  

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16 Deferred tax 

Net deferred tax (liability) / asset  
At 1 January 2015 
Credited / (charged) to the consolidated  
income statement 

Credited / (charged) to equity and other 
comprehensive income  
Effect of foreign exchange rate changes 
At 31 December 2015 

Analysed as: 

Deferred tax assets 
Deferred tax liabilities 

Pension and 
other post-
retirement 
benefits
£m 

Cash flow 
hedges
£m 

Share-based 
payments
£m 

(26.4)

4.9

5.2

Accelerated  
tax 
depreciation 
£m 

Provisions 
and other 
timing 
differences
£m 

Total
£m 

2.8 

(7.3)

(14.5)

Tax
 losses
£m 

6.3

2.9

(0.2)

(0.4)

(2.0)

(4.5) 

3.2 

(1.0)

1.2
–
(22.3)

(7.7)
0.1
(2.9)

(1.8)
–
3.0

–
(0.8)
3.5

– 
(0.3) 
(2.0) 

– 
(0.3)
(4.4)

(8.3)
(1.3)
(25.1)

2015 
 £m  

18.7 
(43.8)
(25.1)

2014
 £m 

25.7
(40.2)
(14.5)

Measured at relevant local statutory tax rates, the Group has an unrecognised deferred tax asset of £21m (2014 – £24m 
restated at local statutory rates) relating to tax relief on trading losses. The asset represents £107m (2014 – £107m) of trading 
losses. The unprovided asset relates to losses which exist within legal entities where forecast taxable profits are not probable in 
the foreseeable future. This now includes the losses associated with the Group’s operations in Russia following a reassessment  
of the availability of suitable profits in that market which resulted in the exceptional tax cost of £4.8m (see notes 8 and 11). 

The deferred tax asset on trading losses of £3.5m (2014 – £6.3m) relates to Chile (£0.5m), China (£0.9m), Greece (£0.5m) and  
all other territories (£1.6m) where future taxable profits are probable. 

The Group has unrecognised deferred tax assets of £25m (2014 – £28m) relating to capital losses. The asset represents £139m  
(2014 – £138m) of losses at the UK future standard rate of 18.0% (2014 – 20.0%). The key territory holding the losses is the UK. 

No deferred tax is recognised on unremitted earnings of overseas subsidiaries on the basis that the Group can control the 
timing of dividends. In addition, the majority of overseas reserves can now be repatriated to the UK with no tax cost. There  
are a small number of territories that do not qualify for this treatment. This principally relates to Ethiopia where dividend tax of 
£2.5m (2014 – £1.9m) is accrued based on current year after tax earnings. 

The £4.4m (2014 – £7.3m) net deferred tax liability for ‘other timing differences’ consists of a £17.2m (2014 – £20.3m) liability in  
respect of the net book value of tangible fixed assets that do not qualify for tax allowances and property revaluations and a net  
£12.8m (2014 – £13.0m) deferred tax asset in respect of provisions and other temporary differences between the accounts base  
and the tax base. The key temporary differences are a £12.9m asset in Australia less other deferred tax liabilities of £0.1m (2014 – 
£2.0m asset in Africa, £3.0m asset in UK, £10.0m asset in Australia less other deferred tax liabilities of £2.0m). 

www.inchcape.com 

121 
inchcape.com 121

 
 
 
 
 
Notes to the financial statements continued 

17 Inventories 

Raw materials and work in progress 
Finished goods and merchandise  

2015 
£m 

16.2 
1,208.2 
1,224.4 

2014
£m  

13.7
985.5
999.2

Vehicles held on consignment which are in substance assets of the Group amount to £216.3m (2014 – £114.3m). These  
have been included in ‘finished goods and merchandise’ with the corresponding liability included within ‘trade and other 
payables’. Payment becomes due when title passes to the Group, which is generally the earlier of six months from delivery  
or the date of sale.  

An amount of £34.4m (2014 – £27.8m) has been provided against the gross cost of inventory at the year end. The cost of 
inventories recognised as an expense in the year is £5,507.8m (2014 – £5,456.0m). The write down of inventory to net realisable 
value recognised as an expense during the year was £36.3m (2014 – £31.0m). All of these items have been included within  
‘cost of sales’ in the consolidated income statement.  

18 Cash and cash equivalents 

Cash at bank and cash equivalents 
Short-term deposits 

2015 
 £m  

335.3 
138.5 
473.8 

2014
 £m  

368.9
159.3
528.2

Cash and cash equivalents are generally subject to floating interest rates determined by reference to short-term benchmark 
rates applicable in the relevant currency or market (primarily LIBOR or the local equivalent). At 31 December 2015, the weighted 
average floating rate was 0.3% (2014 – 0.5%). 

£53.0m (2014 – £37.7m) of cash and cash equivalents are held in countries where prior approval is required to transfer funds 
abroad. If the Group complies with the required procedures, such liquid funds are at its disposition within a reasonable period 
of time. 

At 31 December 2015, short-term deposits have a weighted average period to maturity of 17 days (2014 – 27 days). 

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19 Assets held for sale and disposal group 

Assets directly associated with the disposal group 
Assets held for sale 
Assets held for sale and disposal group 

Liabilities directly associated with the disposal group  

Assets held for sale relate to surplus properties within the UK, which are actively marketed with a view to sale.  

20 Trade and other payables 

Trade payables:  payments received on account 

vehicle funding agreements 
other trade payables 

Other taxation and social security payable 
Accruals and deferred income 
Amounts payable to related parties 
Other payables 

2015
 £m 

56.6
260.0
1,005.5
25.4
204.6
0.1
13.9
1,566.1

Current   

2014  
 £m    

65.6   
231.0   
778.9   
27.6   
175.1   
0.2   
22.3   
1,300.7   

2015 
 £m  

– 
4.5 
4.5 

– 

2015 
 £m  

0.4 
– 
5.1 
– 
7.3 
– 
– 
12.8 

2014 
 £m  

–
8.9
8.9

–

Non-current 

2014 
 £m  

0.8
–
5.8
 – 
8.2
 – 
–
14.8

In certain markets, 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 have a maturity of 90 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 to brand partners (including their captive finance companies) are included within other trade payables together 
with amounts due to other suppliers. Amounts due to facility providers unrelated to the brand partners are disclosed under 
vehicle funding arrangements. Related cash flows are reported within cash flows from operating activities within the 
consolidated statement of cash flows. 

Vehicle funding facilities are subject to LIBOR-based (or similar) interest rates. The interest incurred under these arrangements  
is included within finance costs and classified as stock holding interest. At 31 December 2015, trade payables includes £759.3m 
(2014 – £620.5m) of liabilities where payment is made on deferred terms and which were subject to a weighted average interest 
rate of 2.7% (2014 – 2.9%). 

Management considers the carrying amount of trade and other payables to approximate to their fair value. Long-term 
payables have been discounted where the time value of money is considered to be material. 

www.inchcape.com 

123 
inchcape.com 123

 
 
 
 
 
 
 
 
  
 
 
 
Notes to the financial statements continued 

21 Provisions 

At 1 January 2015 
Charged to the consolidated income statement 
Released to the consolidated income statement 
Effect of unwinding of discount factor 
Utilised during the year 
Effect of foreign exchange rate changes 
At 31 December 2015 

Analysed as: 

Current 
Non-current 

Product 
warranty 
£m 

Vacant 
leasehold 
£m 

Litigation  
£m 

35.4
20.8
(5.4)
0.3
(16.5)
(1.1)
33.5

3.4
0.1
(1.0)
–
(0.6)
(0.1)
1.8

5.5 
0.2 
(0.1) 
– 
(0.2) 
– 
5.4 

Other  
£m 

10.0 
3.8 
(3.3)
– 
(2.0)
– 
8.5 

2015 
£m 

22.7 
26.5 
49.2 

Total 
£m 

54.3
24.9
(9.8)
0.3
(19.3)
(1.2)
49.2

2014
£m 

28.7
25.6
54.3

Product warranty 
Certain Group companies provide self-insured extended warranties beyond those provided by the manufacturer, as part of the 
sale of a vehicle. These are not separable products. The warranty periods covered are up to six years and / or specific mileage 
limits. Provision is made for the expected cost of labour and parts based on historical claims experience and expected future 
trends. These assumptions are reviewed regularly.  

Vacant leasehold 
The Group is committed to certain leasehold premises for which it no longer has a commercial use. These are principally 
located in the UK and Australia. Provision has been made to the extent of the estimated future net cost. This includes taking into 
account existing subtenant arrangements. The expected utilisation period of these provisions is generally over the next 10 years.  

Litigation 
This includes a number of litigation provisions in respect of the exit of certain motors and non-motors businesses. The majority  
of these relate to the exit of our former South American bottling business and shipping business. The cases are largely historical 
claims and are generally expected to be concluded within the next five years. 

Other 
This category principally includes provisions relating to residual values on leased vehicles and provisions relating to restructuring 
activities. These provisions are expected to be utilised within three years. 

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22 Borrowings  

2015 

Current 
Bank overdrafts 
Bank loans 
Finance leases  

Non-current 
Private Placement 
Finance leases  

Total borrowings 

2014 

Current 
Bank overdrafts 
Finance leases  

Non-current 
Private Placement 
Finance leases  

Total borrowings 

Floating rate 

Weighted 
average 
effective 
interest rate 
% 

–
–
–
–

1.5
–
1.5
1.1

Floating rate 

Weighted 
average 
effective 
interest rate 
% 

0.1
–
0.1

1.4
–
1.4
1.0

£m 

98.5
–
–
98.5

308.9
–
308.9
407.4

£m 

105.7
–
105.7

302.4
–
302.4
408.1

Fixed rate 

Weighted 
average 
effective 
interest rate 
% 

Total interest 
bearing  
£m 

On which 
no interest 
is paid  
£m 

–
5.8
6.6
6.0

–
6.8
6.8
6.3

98.5 
3.7 
1.1 
103.3 

308.9 
2.6 
311.5 
414.8 

– 
– 
– 
– 

– 
– 
– 
– 

Fixed rate 

Weighted 
average 
effective 
interest rate 
% 

Total interest 
bearing  
£m 

On which 
no interest 
is paid  
£m 

–
6.3
6.3

–
6.6
6.6
6.5

105.7 
0.8 
106.5 

302.4 
3.5 
305.9 
412.4 

5.7 
– 
5.7 

– 
– 
– 
5.7 

£m 

–
3.7
1.1
4.8

–
2.6
2.6
7.4

£m 

–
0.8
0.8

–
3.5
3.5
4.3

2015
Total 
£m 

98.5
3.7
1.1
103.3

308.9
2.6
311.5
414.8

2014
Total 
£m 

111.4
0.8
112.2

302.4
3.5
305.9
418.1

The above analysis is presented after taking account of the cross currency fixed to floating interest rate swap on the Private 
Placement of US$436m (2014 – US$436m). 

Interest payments on floating rate financial liabilities are determined by reference to short-term benchmark rates applicable  
in the relevant currency or market (primarily LIBOR or the local equivalent). 

The fair values of the Group’s borrowings are not considered to be materially different from their book value, with the exception 
of the Private Placement which includes a fair value basis adjustment of £12.5m (2014 – £23.2m). 

The Group’s borrowings are unsecured. 

At 31 December 2015, the committed funding facilities of the Group comprised a syndicated bank facility of £400m  
(2014 – £450m and a bi-lateral facility of €65m) and Private Placement loan notes totalling US$436m (2014 – US$436m). 

At 31 December 2015, none of the £400m syndicated credit facility was drawn down (2014 – none of either the £450m or €65m 
facilities were drawn down). The £400m facility was entered into in January 2015 with an initial expiry date of January 2020  
with a further two one-year extension options available. In January 2016, the first extension option was exercised extending  
the expiry date to January 2021. 

All US$436m of the Group’s Private Placement loan notes are swapped into Sterling. US$275m is repayable in 2017, and 
US$161m in 2019. 

www.inchcape.com 

125 
inchcape.com 125

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued 

22 Borrowings continued 
The table below sets out the maturity profile of the Group’s borrowings that are exposed to interest rate risk. This analysis is 
presented after taking account of the cross currency fixed to floating interest rate swap on the Private Placement of US$436m 
(2014 – US$436m). 

2015 

Fixed rate 
Bank loans 
Finance leases 

Floating rate 
Bank overdrafts 
Private Placement 

2014 

Fixed rate 
Finance leases 

Floating rate 
Bank overdrafts 
Private Placement 

Less than 
 1 year  
£m 

Between 1 
 and 2 years 
£m 

Between 2 
and 3 years 
£m 

Between 3 
and 4 years 
£m 

Between 4  
and 5 years  
£m 

Greater than  
5 years  
£m 

Total interest 
bearing 
£m 

3.7 
1.1 

98.5 
– 

–
1.1

–
197.2

–
–

–
–

–
0.1

–
111.7

– 
– 

– 
– 

– 
1.4 

– 
– 

3.7
3.7

98.5
308.9

Less than 
 1 year  
£m 

Between 1
 and 2 years 
£m 

Between 2 
and 3 years 
£m 

Between 3 
and 4 years 
£m 

Between 4  
and 5 years  
£m 

Greater than  
5 years  
£m 

Total interest 
bearing 
£m 

0.8 

0.4

0.3

1.0

0.4 

1.4 

4.3

105.7 
– 

–
–

–
193.2

–
–

– 
109.2 

– 
– 

105.7
302.4

23 Financial instruments 
The Group’s financial liabilities, other than derivatives, comprise overdrafts, loan notes, finance leases and trade and other 
payables. The main purpose of these instruments is to raise finance for the Group’s operations. The Group also has various 
financial assets such as trade and other receivables, cash and short-term deposits which arise from its trading operations. 

The Group’s primary derivative transactions are forward and swap currency contracts, and cross currency interest rate swaps.  
The purpose is to manage the currency and interest rate risks arising from the Group’s trading operations and its sources of 
finance. Group policy is that there is no trading or speculation in derivatives. 

The main risks arising from the Group’s financial instruments are interest rate risk, currency risk, credit risk and liquidity risk. 

a. Classes of financial instruments 

2015 

Financial assets 
Available for sale financial assets 
Trade and other receivables 
Derivative financial instruments 
Cash and cash equivalents 
Total financial assets 

Financial liabilities 
Trade and other payables 
Derivative financial instruments 
Borrowings 
Total financial liabilities 

 Loans and 
receivables 
£m 

 Available for 
sale 
£m 

 Held at fair 
value 
£m 

 Amortised  
cost  
£m  

Cash and cash 
equivalents  
£m 

–
271.6
–
–
271.6

–
–
–
–
271.6

1.4
–
–
–
1.4

–
–
–
–
1.4

–
–
134.5
–
134.5

–
(3.6)
–
(3.6)
130.9

– 
– 
– 
– 
– 

(1,467.7) 
– 
(414.8) 
(1,882.5) 
(1,882.5) 

– 
– 
– 
473.8 
473.8 

– 
– 
– 
– 
473.8 

 Total 
£m 

1.4
271.6
134.5
473.8
881.3

(1,467.7)
(3.6)
(414.8)
(1,886.1)
(1,004.8)

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23 Financial instruments continued 

2014 

Financial assets 
Available for sale financial assets 
Trade and other receivables 
Derivative financial instruments 
Cash and cash equivalents 
Total financial assets 

Financial liabilities 
Trade and other payables 
Derivative financial instruments 
Borrowings 
Total financial liabilities 

 Loans and 
receivables 
£m 

 Available for 
sale 
£m 

 Held at fair 
value 
£m 

 Amortised  
cost  
£m  

Cash and 
cash 
equivalents  
£m 

–
233.2
–
–
233.2

–
–
–
–
233.2

1.4
–
–
–
1.4

–
–
–
–
1.4

–
–
102.6
–
102.6

– 
– 
– 
– 
– 

–
(29.9)
–
(29.9)
72.7

(1,190.8) 
– 
(418.1) 
(1,608.9) 
(1,608.9) 

– 
– 
– 
528.2 
528.2 

– 
– 
– 
– 
528.2 

 Total 
£m 

1.4
233.2
102.6
528.2
865.4

(1,190.8)
(29.9)
(418.1)
(1,638.8)
(773.4)

b. Offsetting financial assets and financial liabilities 
The following financial assets are subject to offsetting, enforceable netting arrangements and similar agreements: 

I

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T
R
A
T
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G
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N
A
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C
A
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T
A
T
E
M
E
N
T
S

Gross 
amounts of 
financial 
liabilities set 
off in the 
statement of 
financial 
position 

Net amounts 
of financial 
assets 
presented in 
the statement 
of financial 
position 

Gross 
amounts of 
financial 
assets 

Financial 
instruments 

Related amounts not set off 
in the statement of 
financial position 

As at 31 December 2015 
Derivative financial assets 
Cash and cash equivalents 
Other receivables 
Total 

As at 31 December 2014 
Derivative financial assets 
Cash and cash equivalents 
Other receivables 
Total 

£m 

£m 

£m 

£m 

137.9
473.8
2.1
613.8

104.7
528.2
1.8
634.7

(3.4)
–
(0.6)
(4.0)

(2.1)
–
(0.3)
(2.4)

134.5
473.8
1.5
609.8

102.6
528.2
1.5
632.3

(3.5) 
(97.9) 
– 
(101.4) 

(3.2) 
(111.4) 
– 
(114.6) 

The following financial liabilities are subject to offsetting, enforceable netting arrangements and similar agreements: 

Gross 
amounts of 
financial 
assets set off 
in the 
statement of 
financial 
position 

Net amounts 
of financial 
liabilities 
presented in 
the statement 
of financial 
position 

Gross 
amounts of 
financial 
liabilities 

Financial 
instruments 

Related amounts not set  
off in the statement of 
financial position 

As at 31 December 2015 
Derivative liabilities 
Bank overdrafts 
Other payables 
Total 

As at 31 December 2014 
Derivative liabilities 
Bank overdrafts 
Other payables 
Total 

£m 

£m 

£m 

£m 

(7.0)
(98.5)
(0.6)
(106.1)

(32.0)
(111.4)
(0.3)
(143.7)

3.4
–
0.6
4.0

2.1
–
0.3
2.4

(3.6)
(98.5)
–
(102.1)

(29.9)
(111.4)
–
(141.3)

3.5 
97.9 
– 
101.4 

3.2 
111.4 
– 
114.6 

Cash 
collateral 
received 

£m 

– 
– 
– 
– 

– 
– 
– 
– 

Cash 
collateral 
paid 

£m 

– 
– 
– 
– 

– 
– 
– 
– 

Net 
amount 

£m 

131.0
375.9
1.5
508.4

99.4
416.8
1.5
517.7

Net 
amount 

£m 

(0.1)
(0.6)
–
(0.7)

(26.7)
–
–
(26.7)

www.inchcape.com 

127 
inchcape.com 127

 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued 

23 Financial instruments continued 
For the financial assets and liabilities subject to enforceable netting arrangements or similar agreements above, each 
agreement between the Group and the counterparty allows for net settlement of the relevant financial assets and liabilities  
if the amounts relate to the same transaction and are in the same currency. If the parties subject to the agreement do not  
elect to settle on a net basis, financial assets and liabilities will be settled on a gross basis. However, each party to the netting 
agreement will have the option to settle all such amounts on a net basis in the event of a default of the other party. 

c. Market risk and sensitivity analysis 
Financial instruments affected by market risk include borrowings, deposits and derivative financial instruments. The Group is  
not exposed to commodity price risk. The following analysis, required by IFRS 7, is intended to illustrate the sensitivity to changes 
in market variables, being primarily UK interest rates and the Australian Dollar to Japanese Yen exchange rate. 

The following assumptions were made in calculating the sensitivity analysis: 

•  changes in the carrying value of derivative financial instruments designated as cash flow hedges from movements in  

interest rates are assumed to be recorded fully in equity; 

•  changes in the carrying value of derivative financial instruments designated as fair value hedges from movements in  

interest rates have an immaterial effect on the consolidated income statement and equity due to compensating adjustments 
in the carrying value of debt; 

•  changes in the carrying value of financial instruments not in hedging relationships only affect the consolidated  

income statement; 

•  all other changes in the carrying value of derivative financial instruments designated as hedges are fully effective with  

no impact on the consolidated income statement. 

d. Interest rate risk and sensitivity analysis 
The Group’s interest rate policy has the objective of minimising net interest expense, and protecting the Group from material 
adverse movements in interest rates. Throughout 2015, the Group has borrowed at floating rates only (after taking into account 
existing interest rate hedging activities). This approach maximises the Group’s exposure to the current low interest rate 
environment. If hedging is deemed appropriate by management in the future, the Board has approved the fixing of up to 30% 
of gross borrowings. Instruments approved for this purpose include interest rate swaps, forward rate agreements and options. 
The Group’s exposure to the risk of changes in market interest rates arises primarily from the floating rate interest payable on the 
Group’s Private Placement loan notes, bank borrowings, supplier related finance and the returns available on surplus cash. 

Interest rate risk table 
The following table demonstrates the sensitivity of the Group’s profit before tax to a reasonably possible change in interest rates 
on bank borrowings, supplier related finance and cash balances as at 31 December 2015 with all other variables held constant. 

Increase 
in basis  
points  

 Effect on profit 
before tax
£m 

75 
50 
500 
100 

75 
50 
500 
100 

(3.9)
(0.9)
(1.0)
(2.1)

(3.5)
0.2
–
(1.7)

2015 
Sterling 
Euro 
Russian Rouble 
Australian Dollar 

2014 
Sterling 
Euro 
Russian Rouble 
Australian Dollar 

128 
128

Inchcape plc Annual Report and Accounts 2015 
Inchcape Annual Report and Accounts 2015

 
 
 
 
 
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23 Financial instruments continued 
e. Foreign currency risk 
The Group publishes its consolidated financial statements in Sterling and faces currency risk on the translation of its earnings 
and net assets, a significant proportion of which are in currencies other than Sterling. 

Transaction exposure hedging 
The Group has transactional currency exposures, where sales or purchases by an operating unit are in currencies other  
than that unit’s functional currency. For a significant proportion of the Group, these exposures are removed as trading is 
denominated in the relevant local currency. In particular, local billing arrangements are in place for many of our businesses 
with our brand partners. The principal exception is for our business in Australasia, which purchases vehicles and parts in 
Japanese Yen. 

In this instance, the Group seeks to hedge forecast transactional foreign exchange rate risk using forward foreign currency 
exchange contracts. The effective portion of the gain or loss on the hedge is recognised in the consolidated statement of 
comprehensive income to the extent it is effective and recycled into the consolidated income statement at the same time as 
the underlying hedged transaction affects the consolidated income statement. Under IAS 39, hedges are documented and 
tested for hedge effectiveness on an ongoing basis. 

Hedge of foreign currency debt 
The Group uses cross currency interest rate swaps to hedge the forward foreign currency risk associated with the US$436m 
Private Placement. The effective portion of the gain or loss on the hedge is recognised in the consolidated income statement  
at the same time as the underlying hedged transaction affects the consolidated income statement. 

Foreign currency risk table 
The following table shows the Group sensitivity to a reasonably possible change in foreign exchange rates on its Japanese  
Yen financial instruments. In this table, financial instruments are only considered sensitive to foreign exchange rates when  
they are not in the functional currency of the entity that holds them.  

2015 
Yen 
Yen 

2014 
Yen 
Yen 

Increase / 
(decrease) in 
exchange 
rate  

 Effect on
 equity
£m 

+10% 
-10% 

+10% 
-10% 

0.1
(0.1)

–
–

f. Credit risk 
The amount due from counterparties arising from cash deposits and the use of financial instruments creates credit risk. 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 notional amounts of financial instruments used in interest rate and foreign exchange management do  
not represent the credit risk arising through the use of these instruments. The immediate credit risk of these instruments is 
generally estimated by the fair value of contracts with a positive value. Credit limits are reviewed regularly. 

The table below analyses the Group’s short-term deposits and derivative assets by credit exposure excluding bank balances 
and cash in hand: 

Credit rating of counterparty 
AA- 
A+ 
A 
A- 
BBB+ 
BBB 
No rating1 

Derivative 
assets 
£m 

72.7
5.9
52.9
–
2.0
1.0
–
134.5

2015   

 Short-term 
deposits 

£m   

8.6   
31.2   
47.5   
1.0   
5.2   
–   
45.0   
138.5   

Derivative  
assets 
£m 

2014 

 Short-term 
deposits
£m 

0.7 
– 
101.5 
0.4 
– 
– 
– 
102.6 

18.2
26.0
76.9
9.3
–
–
28.9
159.3

1. Counterparties in certain markets in which the Group operates do not have a credit rating. 

www.inchcape.com 

129 
inchcape.com 129

 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued 

23 Financial instruments continued 
No credit limits were exceeded during the reporting period and management does not expect any losses from non-
performance by these counterparties. 

The maximum exposure to credit risk for cash at bank, cash equivalents, receivables and other financial assets is represented 
by their carrying amount. 

Total cash at bank of £335.3m (2014 – £368.9m) includes cash in the Group’s regional pooling arrangements which are offset 
against borrowings for interest purposes. Netting of cash and overdraft balances in the consolidated statement of financial 
position only occurs to the extent that there is the legal ability and intention to settle net. As such, overdrafts are presented in 
current liabilities to the extent that there is no intention to offset with the cash balance. 

Trade receivables include amounts due from a number of finance houses in respect of vehicles sold to customers on finance 
arranged through the Group. An independent credit rating agency is used to assess the credit standing of each finance house. 
Limits for the maximum outstanding with each finance house are set accordingly.  

g. Liquidity risk 
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of  
funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due  
to the dynamic nature of the underlying businesses, Group Treasury aims to maintain flexibility in funding by keeping  
committed credit lines available.  

The table below summarises the maturity profile of the Group’s financial assets and liabilities at 31 December 2015 and 2014 
based on expected contractual undiscounted cash flows:  

Less than 
3 months 
£m 

Between 
3 to 12 
months
£m 

Between  
1 to 5 years  
£m 

Greater than  
5 years  
£m 

Total 
£m 

459.6
249.8
0.1
13.9
723.4

(99.2)
(1,371.6)
(3.3)
(1,474.1)
(750.7)

Less than 
3 months 
£m 

509.8
213.9
0.2
2.1
726.0

14.2
14.4
0.1
33.3
62.0

(18.2)
(88.3)
(5.5)
(112.0)
(50.0)

Between 
3 to 12 
months 
£m 

18.4
12.8
0.2
19.3
50.7

(111.6)
(1,051.9)
(18.0)
(1,181.5)
(455.5)

(17.3)
(116.9)
(15.4)
(149.6)
(98.9)

– 
6.8 
0.8 
376.3 
383.9 

(332.2) 
(7.8) 
(274.8) 
(614.8) 
(230.9) 

– 
0.6 
0.4 
– 
1.0 

(1.4)
– 
– 
(1.4)
(0.4)

473.8
271.6
1.4
423.5
1,170.3

(451.0)
(1,467.7)
(283.6)
(2,202.3)
(1,032.0)

Between  
1 to 5 years  
£m 

Greater than  
5 years  
£m 

Total 
£m 

– 
5.4 
0.6 
375.1 
381.1 

(341.9) 
(22.0) 
(279.9) 
(643.8) 
(262.7) 

– 
1.1 
0.4 
– 
1.5 

(1.4)
– 
– 
(1.4)
0.1 

528.2
233.2
1.4
396.5
1,159.3

(472.2)
(1,190.8)
(313.3)
(1,976.3)
(817.0)

2015 

Financial assets 
Cash and cash equivalents 
Trade and other receivables 
Available for sale financial assets 
Derivative financial instruments 

Financial liabilities 
Interest bearing loans and borrowings 
Trade and other payables 
Derivative financial instruments 

Net outflows 

2014 

Financial assets 
Cash and cash equivalents 
Trade and other receivables 
Available for sale financial assets 
Derivative financial instruments 

Financial liabilities 
Interest bearing loans and borrowings 
Trade and other payables 
Derivative financial instruments 

Net outflows 

130 
130

Inchcape plc Annual Report and Accounts 2015 
Inchcape Annual Report and Accounts 2015

 
 
 
 
 
 
 
 
 
 
 
 
 
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P
O
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G
O
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A
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N
A
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23 Financial instruments continued 
h. Fair value measurement 
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: 

Assets 
Derivatives used for hedging 
Available for sale financial assets 

Liabilities 
Derivatives used for hedging 

Level 1
£m 

Level 2
£m 

–
1.4
1.4

134.5
–
134.5

2015 

Total 
£m 

134.5
1.4
135.9

Level 1 
£m 

Level 2 
£m 

– 
1.4 
1.4 

102.6 
– 
102.6 

2014 

Total 
£m 

102.6
1.4
104.0

–

(3.6)

(3.6)

– 

(29.9)

(29.9)

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. 

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 prevailing at 31 December 2015. 

The Group’s derivative financial instruments comprise the following: 

Cross currency interest rate swaps 
Forward foreign exchange contracts  

 2015
£m 

107.4
27.1
134.5

Assets   

 2014 

£m    

100.1   
2.5   
102.6   

2015
£m 

–
(3.6)
(3.6)

Liabilities 

2014
£m 

–
(29.9)
(29.9)

The ineffective portion recognised in the consolidated income statement that arises from fair value hedges amounted to a gain 
of £0.9m (2014 – gain of £1.5m). The ineffective portion recognised in the consolidated income statement that arises from cash 
flow hedges amounted to a gain of £nil (2014 – £nil). 

www.inchcape.com 

131 
inchcape.com 131

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued 

23 Financial instruments continued 
Cash flow hedges 
The Group principally uses forward foreign exchange contracts to hedge purchases in a non-functional currency against 
movements in exchange rates. The cash flows relating to these contracts are generally expected to occur within 12 months  
of the end of the reporting period (2014 – 15 months). 

The nominal principal amount of the outstanding forward foreign exchange contracts relating to transactional exposures  
at 31 December 2015 was £535.3m (2014 – £746.0m). 

Net fair value gains and losses recognised in the hedging reserve in shareholders’ equity (see note 25) on forward foreign 
exchange contracts as at 31 December 2015 are expected to be released to the consolidated income statement within  
12 months of the end of the reporting period (2014 – 15 months). 

Fair value hedge 
At 31 December 2015, the Group had in place five cross currency interest rate swaps. Four of these total US$475m, which hedge 
changes in the fair value of the Group’s 10 and 12 year Private Placement loan notes. Under these swaps, the Group receives 
fixed rate US Dollar interest of 5.94% on US$275m and 6.04% on US$200m and pays GBP LIBOR +85bps and GBP LIBOR +90bps for 
the 10 and 12 year notes respectively.  

An additional US$39.2m cross currency interest rate swap was put in place after the debt reduction in 2009 to offset the non-
required portion of the original US$475m swaps. Under this swap, the Group pays US Dollar interest of 6.04% on US$39.2m and 
receives GBP LIBOR +214bps for the 12 year notes only. The loan notes and cross currency interest rate swaps have the same 
critical terms. 

i. Capital management 
The Group’s capital structure consists of equity and debt. Equity represents funds raised from shareholders and debt represents 
funds raised from banks and other financial institutions. The primary objective of the Group’s management of debt and equity  
is to ensure that it maintains a strong credit rating and healthy capital ratios in order to finance the Group’s activities, both  
now and in the future, and to maximise shareholder value. 

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain 
or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or 
issue new shares. The Directors consider the Group’s capital structure and dividend policy at least twice a year prior to the 
announcement of results, taking into account the Group’s ability to continue as a going concern and the requirements of  
its business plan. 

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. The Group is required to maintain a ratio of not less than 
three to one and was compliant with this covenant throughout the year.  

The Group monitors group leverage by reference to three tests: Adjusted EBITA interest cover, the ratio of net debt to EBITDA  
and the ratio of net debt to market capitalisation.  

Adjusted EBITA interest cover (times)* 
Net debt to EBITDA (times)** 
Net debt / market capitalisation (percentage)*** 

*  Calculated as Adjusted EBITA / interest on consolidated borrowings. 

**  Calculated as net debt / earnings before exceptional items, interest, tax, depreciation and amortisation. 

***Calculated as net debt / market capitalisation as at 31 December. 

2015 

111.8 
n/a 
n/a 

2014 

112.2
n/a
n/a

132 
132

Inchcape plc Annual Report and Accounts 2015 
Inchcape Annual Report and Accounts 2015

 
 
 
I

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P
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G
O
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A
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I

F
N
A
N
C
A
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I

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A
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M
E
N
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24 Share capital 
a. Allotted, called up and fully paid up 

Ordinary shares (nominal value of 10.0p each) 
At 1 January 
Allotted under share option schemes  
Cancelled under share buy back 
At 31 December 

2015
Number 

2014 
Number 

448,741,789
–
(11,931,693)
436,810,096

463,808,537 
277,362 
(15,344,110) 
448,741,789 

2015 
£m 

45.0 
– 
(1.2)
43.8 

2014
£m 

46.5
–
(1.5)
45.0

b. Share buy back programme 
During the year, the Group repurchased 11,931,693 (2014 – 15,344,110) of its own shares through purchases on the London 
Stock Exchange at a cost of £90.8m (2014 – £99.4m). The shares repurchased during the year were cancelled, with none held 
within treasury shares at the end of the reporting period. An amount of £1.2m (2014 – £1.5m), equivalent to the nominal value  
of the cancelled shares, has been transferred to the capital redemption reserve. Costs of £0.6m (2014 – £0.6m) associated with 
the transfer to the Group of the repurchased shares and their subsequent cancellation have been charged to the profit and 
loss reserve. 

c. Substantial shareholdings 
Details of substantial interests in the Company’s issued ordinary share capital received by the Company at 14 March 2016 
under the provisions of the Companies Act 2006 have been disclosed in the significant shareholdings section of the Corporate 
Governance Report. 

d. Share options 
At 31 December 2015, options to acquire ordinary shares of 10.0p each in the Company up to the following numbers under  
the schemes below were outstanding as follows: 

Number of ordinary  
shares of 10.0p each 

Exercisable until 

Option price (£) 

  Number of ordinary  
shares of 10.0p each 

Exercisable until 

Option price (£) 

The Inchcape 1999 Share Option Plan  
– approved (Part II – UK) 
11,501 
6,339 

19 May 2019 
7 April 2020 

– unapproved (Part I – UK) 
2,501 
5,449 
– unapproved overseas (Part I – Overseas) 
306,329 
58,058 

19 May 2019 
7 April 2020 

19 May 2019 
7 April 2020 

The Inchcape SAYE Share Option Scheme  
– approved 

2.00   39,384 
3.10   596,694 
  522,623 
  989,790 
  Recruitment and Retention Plan 

1 May 2016 
1 May 2017 
1 May 2018 
1 May 2019 

31 March 2025 

2.00   205,125 
3.10  

2.00  
3.10  

3.07
4.76
5.40
5.78

0.10

Included within the retained earnings reserve are 631,253 (2014 – 1,272,161) ordinary shares in the Company held by the 
Inchcape Employee Trust, a general discretionary trust whose beneficiaries include current and former employees of the Group 
and their dependants. The book value of these shares at 31 December 2015 was £4.5m (2014 – £27.2m). The market value of 
these shares at both 31 December 2015 and 14 March 2016 was £5.0m and £4.5m respectively (31 December 2014 – £9.2m,  
9 March 2015 – £9.4m). 

www.inchcape.com 

133 
inchcape.com 133

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the financial statements continued 

25 Other reserves  

At 1 January 2014 
Cash flow hedges: 
– Fair value movements 
– Reclassified and reported in inventories 
– Tax on cash flow hedges 
Fair value movement transferred from available for sale financial assets 
Effect of foreign exchange rate changes 
At 1 January 2015 
Cash flow hedges: 
– Fair value movements 
– Reclassified and reported in inventories 
– Tax on cash flow hedges 
Effect of foreign exchange rate changes 
At 31 December 2015 

Available for 
sale reserve
£m 

Translation 
reserve 
£m 

0.3

17.4 

Hedging  
reserve 
£m 

(9.0)

Total other 
reserves
£m 

8.7

–
–
–
(0.3)
–
–

–
–
–
–
–

– 
– 
– 
– 
(180.1) 
(162.7) 

– 
– 
– 
(49.0) 
(211.7) 

(15.3)
(0.3)
4.7 
– 
– 
(19.9)

38.7 
(15.2)
(7.0)
– 
(3.4)

(15.3)
(0.3)
4.7
(0.3)
(180.1)
(182.6)

38.7
(15.2)
(7.0)
(49.0)
(215.1)

The effect of foreign exchange rate changes includes a gain of £7.0m (2014 – £nil) on the liquidation of overseas subsidiaries 
that has been reclassified to the consolidated income statement in accordance with IAS 21, ‘The effects of changes in foreign 
exchange rates’. 

Available for sale reserve 
Gains and losses on available for sale financial assets are recognised in the ‘available for sale reserve’ until the asset is sold  
or is considered to be impaired, at which time the cumulative gain or loss is included in the consolidated income statement. 

Translation reserve 
The translation reserve is used to record foreign exchange rate changes relating to the translation of the results of foreign 
subsidiaries arising after 1 January 2004. It is also used to record foreign exchange differences arising on long-term foreign 
currency borrowings used to finance or hedge foreign currency investments.  

Hedging reserve 
For cash flow hedges that meet the conditions for hedge accounting, the portion of the gains or losses on the hedging 
instrument that are determined to be an effective hedge are recognised directly in shareholders’ equity. When the hedged firm 
commitment results in the recognition of a non-financial asset or liability then, at the time the asset or liability is recognised, the 
associated gains or losses that had previously been recognised in shareholders’ equity are included in the initial measurement 
of the acquisition cost or other carrying amount of the asset or liability.  

26 Retained earnings 

At 1 January  
Total comprehensive income attributable to owners of the parent for the year: 
– Profit for the year 
– Actuarial (losses) / gains on defined pension benefits (note 5) 
– Actuarial losses on defined benefits held by joint ventures (note 13) 
– Tax credited / (charged) to reserves 
Total comprehensive income for the year 
Share-based payments, net of tax 
Share buy back programme 
Net (purchase) / disposal of own shares by Inchcape Employee Trust 
Dividends paid (note 10) 
At 31 December 

2015  
£m  

2014
£m 

1,148.2 

1,135.0

175.8 
(26.8)
– 
1.2 
150.2 
9.8 
(91.4)
(18.9)
(91.1)
1,106.8 

179.6
2.5
(0.2)
(0.9)
181.0
12.5
(100.0)
1.2
(81.5)
1,148.2

134 
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27 Notes to the consolidated statement of cash flows 
a. Reconciliation of cash generated from operations 

Cash flows from operating activities  
Operating profit  
Exceptional items (see note 2) 
Amortisation of intangible assets 
Depreciation of property, plant and equipment 
Profit on disposal of property, plant and equipment 
Share-based payments charge 
(Increase) / decrease in inventories 
(Increase) / decrease in trade and other receivables 
Increase in trade and other payables 
Decrease in provisions 
Pension contributions less than / (in excess of) the pension charge for the year* 
(Increase) / decrease in interest in leased vehicles 
Payments in respect of exceptional items 
Other non-cash items  
Cash generated from operations 

* Includes additional payments of £1.7m (2014 – £1.7m). 

b. Reconciliation of net cash flow to movement in net funds 

Net (decrease) / increase in cash and cash equivalents  
Net cash (outflow) / inflow from borrowings and finance leases 
Change in net cash and debt resulting from cash flows 
Effect of foreign exchange rate changes on net cash and debt 
Net movement in fair value 
Movement in net funds 
Opening net funds 
Closing net funds 

Net funds is analysed as follows: 

Cash at bank and cash equivalents 
Short-term deposits 
Bank overdrafts 
Cash and cash equivalents 
Bank loans 
Finance leases 

Fair value of cross currency interest rate swap 
Net funds 

2015 
£m  

 2014
£m 

275.2 
49.5 
14.0 
34.5 
(2.1)
9.6 
(246.5)
(68.5)
282.2 
(4.2)
2.7 
(12.3)
– 
(5.7)
328.4 

2015 
£m  

(20.3)
(3.2)
(23.5)
(21.2)
0.9 
(43.8)
210.2 
166.4 

 2015  
£m  

335.3 
138.5 
(98.5)
375.3 
(312.6)
(3.7)
59.0 
107.4 
166.4 

271.0
47.4
9.4
35.0
(17.6)
9.5
3.8
3.4
59.3
(11.9)
(1.0)
3.3
(1.3)
(4.5)
405.8

2014 
£m 

125.9
1.1
127.0
(41.3)
1.5
87.2
123.0
210.2

 2014 
£m 

368.9
159.3
(111.4)
416.8
(302.4)
(4.3)
110.1
100.1
210.2

www.inchcape.com 

135 
inchcape.com 135

 
 
 
 
 
Notes to the financial statements continued 

28 Acquisitions and disposals 
During the year, the Group acquired a new dealership in the UK for a consideration of £5.1m, with goodwill arising on the 
transaction of £4.0m. 

In 2015, the Group disposed of a small number of dealerships in Australia and its interest in Excelease SA, a financial services 
business in Belgium, generating disposal proceeds of £5.4m and a profit on disposal of £0.6m (2014 – disposals in Australia  
and Finland at net book value generating disposal proceeds of £1.9m). 

29 Guarantees and contingencies 

Guarantees, performance bonds and contingent liabilities 

2015 
£m 

31.2 

2014
£m 

25.1

Guarantees and contingencies largely comprise letters of credit issued on behalf of the Group in the ordinary course  
of business. 

The Group also has, in the ordinary course of business, commitments under foreign exchange instruments relating to the 
hedging of transactional exposures (see note 23). 

Franked Investment Income Group Litigation Order 
Inchcape is a participant in an action in the United Kingdom against HM Revenue and Customs (HMRC) in the Franked 
Investment Income Group Litigation Order (FII GLO). There are 25 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. The resolution of test cases is 
incomplete. The current status of the test claims is that a judgment on a range of issues of quantification was given in the High 
Court on 18 December 2014 and permission has been granted to both HMRC and the test claimants to appeal to the Court  
of Appeal. The appeal hearing is now expected to take place in June 2016. Inchcape is not a test case and its specific claim 
has not been considered by the Courts.  

In January 2016, the management judge of the GLO, Henderson J, granted summary judgment to seven other corporate 
groups in the GLO in relation to their claims for restitution of Advance Corporation Tax (ACT) paid under the Foreign 
Income Dividend (FID) regime which is a subsidiary component of the claims in the FII GLO. The Judge found that liability 
for the FID component of the claims has now been conclusively determined in the British American Tobacco (BAT) test 
case and that these other FID claims are in an identical position. Accordingly, the Judge found that those claimants are 
entitled to summary judgment on that part of their claims save for a portion of compound interest which is still subject to 
litigation in another case. 

In September 2015, Inchcape also filed an application at the High Court for summary judgment in respect of the 
component of its claim in the FII GLO with a hearing planned for February 2016. HMRC and Inchcape agreed that 
Inchcape’s application is also to be determined on the basis of the January judgment handed down in respect of the 
other seven claimants. Inchcape has therefore also been awarded summary judgment on the FID component of its  
claim but without the need for a hearing. 

The judge refused HMRC’s application for permission to appeal the summary judgments on the basis that their case  
was unarguable. Notwithstanding this, HMRC has renewed that application to the Court of Appeal. 

The amount expected to be paid by HMRC to the Group under the summary judgment is approximately £6.5m. This 
amount is calculated partially on a simple interest basis. The calculation of the amount due is still under dispute and  
so could change in the future, for example as a result of the resolution of the litigation referred to above in respect of 
compound interest. It is also subject to refund if HMRC were granted leave to appeal and that appeal was successful. 
The amount due will be subject to the new 45% withholding tax introduced in Finance (No. 2) Act 2015. The legality of  
this tax is itself also the subject of litigation.  

No potential receipts have been recognised in the period to 31 December 2015 in the results of the Group due to the 
uncertainty of the amounts and eventual outcome as at that date. 

136 
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30 Commitments 
a. Capital commitments 
Contracts placed for future capital expenditure at the balance sheet date but not yet incurred are as follows: 

Property, plant and equipment 
Computer software 
Vehicles subject to residual value commitments* 

2015 
£m 

16.8 
2.0 
83.4 

2014
£m 

34.9
2.0
86.6

* Residual value commitments comprise the total repurchase liability on all vehicles sold subject to a residual value commitment, of which  
£9.1m (2014 – £10.5m) has been included within ‘trade and other payables’. These commitments are largely expected to be settled over  
the next three years. 

b. Lease commitments 
Operating lease commitments – Group as lessee 
The Group has entered into non-cancellable operating leases for various offices, warehouses and dealerships. These leases 
have varying terms, escalation clauses and renewal rights. 

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Within one year 
Between one and five years 
After five years 

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2015 
£m 

53.7 
122.7 
192.8 
369.2 

2014
£m 

51.2
129.3
209.8
390.3

Operating lease commitments – Group as lessor 
The Group has entered into non-cancellable operating leases on a number of its vehicles and certain properties. These leases 
have varying terms, escalation clauses and renewal rights and are not individually significant to the Group. 

Future minimum lease payments receivable under non-cancellable operating leases are as follows: 

Within one year 
Between one and five years 
After five years 

2015 
£m 

4.1 
8.6 
6.7 
19.4 

2014
£m 

3.4
7.2
9.6
20.2

Finance leases and hire purchase contracts 
The Group has finance leases and hire purchase contracts for various items of property, plant and equipment. These  
leases have varying terms, escalation clauses and renewal rights. Future minimum lease payments under finance leases  
and hire purchase contracts, together with the present value of the net minimum lease payments (included within borrowings), 
are as follows:  

Minimum lease payments: 
– Within one year 
– Between one and five years 
– After five years 
Total minimum lease payments 
Less: future finance charges 
Present value of finance lease liabilities 

2015 
£m 

0.8 
1.6 
3.0 
5.4 
(1.7)
3.7 

2014
£m 

1.0
2.6
2.8
6.4
(2.1)
4.3

www.inchcape.com 

137 
inchcape.com 137

 
 
 
 
 
Notes to the financial statements continued 

31 Related party disclosures 
a. Trading transactions 
Intra-group transactions have been eliminated on consolidation and are not disclosed in this note. Details of transactions 
between the Group and other related parties are disclosed below: 

Vehicles purchased from related parties 
Vehicles sold to related parties 
Other income paid to related parties 
Other income received from related parties 

Transactions   

Amounts outstanding 

2015
£m 

–
–
0.6
–

2014 

£m   

0.2   
0.9   
1.1   
0.2   

2015 
£m 

– 
– 
0.1 
– 

2014
£m 

–
–
0.2
–

All of the transactions arise in the ordinary course of business and are on an arm’s length basis. The amounts outstanding are 
unsecured and will be settled in cash. There have been no guarantees provided or received for any related party receivables.  
The Group has not raised any provision for doubtful debts relating to amounts owed by related parties (2014 – £nil).  

b. Compensation of key management personnel 
The remuneration of the Board of Directors and the Executive Committee was as follows: 

Wages and salaries 
Post-retirement benefits 
Share-based payments 
Compensation for loss of office  

2015 
 £m  

6.4 
1.0 
4.2 
0.4 
12.0 

2014
 £m 

8.7
0.9
4.2
–
13.8

The remuneration of the Directors and other key management is determined by the Remuneration Committee having regard  
to the performance of individuals and market trends. Further details of emoluments paid to the Directors are included in the 
Directors’ Report on Remuneration. 

32 Foreign currency translation 
The main exchange rates used for translation purposes are as follows: 

Australian Dollar 
Euro 
Hong Kong Dollar 
Singapore Dollar 
Russian Rouble 

Average rates   

Year end rates 

2015 

2.04
1.38
11.85
2.10
93.72

2014   

1.83   
1.24   
12.80   
2.09   
63.29   

2015 

2014 

2.02 
1.36 
11.42 
2.09 
107.30 

1.91
1.29
12.08
2.06
92.65

33 Events after the reporting period 
In the year ended 31 December 2015, the Company purchased, for cancellation, 11,931,693 ordinary shares at a cost of 
£91.4m (see note 24). In the period from 1 January to 14 March 2016, the Company purchased, for cancellation, a further 
4,541,107 ordinary shares at a cost of £32.0m. The Company is committed to completing a £58.6m share buy back programme 
in the first half of 2016. 

138 
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Five year record 

The information presented in the table below is prepared in accordance with IFRS, as in issue and effective at that year  
end date. 

Consolidated income statement 
Revenue 

2015
£m 

2014
£m 

2013 
£m  

2012 
£m  

2011
£m 

6,836.3

6,702.7

6,524.9 

6,085.4 

5,826.3

Operating profit before exceptional items 
Operating exceptional items 
Operating profit 
Share of profit / (loss) after tax of joint ventures and associates 
Profit before finance and tax 
Net finance costs before exceptional items 
Finance costs exceptional items 
Profit before tax 
Tax before exceptional tax 
Exceptional tax 
Profit after tax 
Non controlling interests  
Profit for the year 

Basic: 
– Profit before tax 
– Earnings per share (pence) 
Adjusted (before exceptional items): 
– Profit before tax 

– Earnings per share (pence) 
Dividends per share – interim paid and final proposed (pence) 

Consolidated statement of financial position 
Non-current assets 
Other assets less (liabilities) excluding net funds  

Net funds  
Net assets 

Equity attributable to owners of the parent 
Non controlling interests 
Total shareholders’ equity 

324.7
(49.5)
275.2
0.7
275.9
(13.3)
–
262.6
(74.9)
(4.8)
182.9
(7.1)
175.8

262.6
39.8p

312.1

52.1p
20.9p

318.4
(47.4)
271.0
(1.9)
269.1
(13.3)
–
255.8
(68.6)
–
187.2
(7.6)
179.6

255.8
39.7p

303.2

50.2p
20.1p

286.9 
(8.5) 
278.4 
– 
278.4 
(12.3) 
– 
266.1 
(65.9) 
0.6 
200.8 
(6.6) 
194.2 

266.1 
41.8p 

274.6 

43.5p 
17.4p 

259.8 
0.7 
260.5 
0.2 
260.7 
(13.0)
– 
247.7 
(60.8)
0.5 
187.4 
(5.9)
181.5 

247.7 
39.4p 

247.0 

39.1p 
14.5p 

244.4
(13.4)
231.0
(3.0)
228.0
(13.7)
(10.9)
203.4
(59.2)
3.6
147.8
(5.6)
142.2

203.4
31.0p

227.7

35.5p
11.0p

1,259.1
(183.6)
1,075.5
166.4
1,241.9

1,219.0
22.9
1,241.9

1,341.2
(233.3)
1,107.9
210.2
1,318.1

1,292.9
25.2
1,318.1

1,512.1 
(135.9) 
1,376.2 
123.0 
1,499.2 

1,464.4 
(212.2)
1,252.2 
276.2 
1,528.4 

1,350.0
(236.0)
1,114.0
243.5
1,357.5

1,470.0 
29.2 
1,499.2 

1,502.6 
25.8 
1,528.4 

1,329.1
28.4
1,357.5

www.inchcape.com 

139 
inchcape.com 139

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Independent auditors’ report to the members of Inchcape plc 

Report on the Group financial statements 
Our opinion 
In our opinion, Inchcape plc’s Group financial statements (the “financial statements”): 

•  give a true and fair view of the state of the Group’s affairs as at 31 December 2015 and of its profit and cash flows for the  

year then ended; 

•  have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by  

the European Union; and 

•  have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation. 

What we have audited 
The financial statements, included within the Annual Report & Accounts 2015 (the “Annual Report”), comprise: 

•  Consolidated statement of financial position as at 31 December 2015; 
•  Consolidated statement of comprehensive income for the year then ended; 
•  Consolidated statement of cash flows for the year then ended; 
•  Consolidated statement of changes in equity for the year then ended; and 
•  the notes to the financial statements, which include a summary of significant accounting policies and other  

explanatory information. 

Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial 
statements. These are cross-referenced from the financial statements and are identified as audited. 

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and 
IFRSs as adopted by the European Union. 

Our audit approach 
Overview 
Materiality 

•  Overall group materiality: £15.6 million which represents 5% of profit before taxation and  

exceptional items. 

Audit scope 

•  We conducted our work in 16 countries covering 22 reporting units.
•  The reporting units where we conducted our audit work accounted for 89% of the Group’s revenues 

and 90% of the Group’s profit before taxation. 

•  We instructed and maintained regular contact with the component audit teams and evaluated the 

Areas of focus 

results of their work performed. 
•  Goodwill impairment assessment.
•  Manufacturers’ bonuses and rebates. 
•  Carrying value of inventory. 
•  Tax exposures and provisions. 

The scope of our audit and our areas of focus 
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). 

We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements.  
In particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting 
estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits 
we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of 
bias by the Directors that represented a risk of material misstatement due to fraud.  

The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, 
are identified as “areas of focus” in the table below. We have also set out how we tailored our audit to address these specific 
areas in order to provide an opinion on the financial statements as a whole, and any comments we make on the results of our 
procedures should be read in this context. This is not a complete list of all risks identified by our audit. 

140 
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Independent auditors’ report to the members of Inchcape plc continued 

Area of focus 

Goodwill impairment assessment 
Refer to page 57 (Audit Committee Report), page 87 
(accounting policies) and page 115 (note 11). 

Inchcape plc has £345.3 million of goodwill across five Cash 
Generating Units or groups of Cash Generating Units (together 
“CGUs”) detailed in note 11 to the financial statements. The 
risk is that this balance is overstated. 

For the CGUs which contain goodwill, the determination of 
recoverable amount, being the higher of value in use and fair 
value less costs to dispose of the CGU, requires judgements 
on the part of management in valuing the relevant CGUs. 
Recoverable amounts are based on management’s view  
of future trading performance and profitability and the  
most appropriate discount and long-term growth rates. As 
required by accounting standards, management tests all 
CGUs containing goodwill for impairment at least on an 
annual basis. 

As described further in note 11, management has recorded 
an impairment charge of £49.5 million against the goodwill  
in its Russian business, as a result of the sustained weaker 
trading conditions and economic outlook in the market.  
This impairment charge represented the remaining  
Russian goodwill. 

We focused our testing on the estimated value in use  
of the Russian CGU to ensure that the impairment charge  
is appropriate. 

Manufacturers’ bonuses and rebates 
Refer to page 57 (Audit Committee Report) and page 87 
(accounting policies). 

In certain markets, principally the UK, the Group receives 
rebates which are based in part on sales targets set by the 
Original Equipment Manufacturers (OEMs). The Group is also 
entitled to further OEM bonuses and rebates dependent on 
achieving other targets – including non-financial metrics. 

The manufacturers’ bonuses and rebates are usually 
determined by the OEMs and have varying terms, the majority 
of which are governed by annual agreements, whilst others 
are based on shorter-term arrangements entered into during 
the year. 

We focused on this area as the amounts are material and 
because not all bonuses and rebates are directly linked to 
quantitative measures, which means that the recognition of 
elements of these amounts requires management judgement 
and estimation in determining whether they have been 
earned as at the balance sheet date. 

How our audit addressed the area of focus 
We evaluated management’s future cash flow forecasts and 
the process by which they were drawn up, including testing 
the underlying calculations and comparing them with the 
latest Board approved budgets. We challenged: 

• 

• 

• 

projected vehicle volume and margin forecasts 
over the next five years by comparing them with 
external industry forecasts where available, and 
historical and current results; 

the long-term growth rate used to extrapolate the 
cash flows beyond year five (the period covered  
by Board approved forecasts) into perpetuity, by 
comparing them with historical results and wider 
industry forecasts; and 

the discount rate, by independently calculating  
the cost of capital for the Group. 

We evaluated the historical accuracy of budgets and 
forecasts, for example, comparing the budgets used in the 
prior year value-in-use model against the actual performance 
of the business in the current year. These procedures enabled 
us to assess the accuracy of the forecasting process. 

For the Russian CGU, where the assets are now fully impaired, 
we calculated the extent to which management’s 
assumptions would have to change for the impairment 
charge of £49.5 million to be materially misstated. 

We challenged projected vehicle volume and margin 
forecasts over the next five years by comparing them  
with external industry forecasts.  

Recognising the uncertainty of the Russian market in 
particular, we satisfied ourselves as to the reasonableness  
of the assumptions used and judgements made by 
management and considered the impairment of  
£49.5 million to be appropriate. 

For all other CGUs, where no impairment has been 
recognised in 2015, we calculated the degree to which  
these assumptions would need to move before an 
impairment charge would have to be recognised and  
found that management’s judgement that no impairment 
was required was supported by reasonable assumptions. 

We also agreed the appropriateness of the related disclosures 
in note 11 of the financial statements, including the sensitivities 
provided with respect to Lithuania. 

We understood and evaluated the controls and processes 
with respect to manufacturers’ bonuses and rebates.  

Confirmations were sent to a number of OEMs requesting 
confirmation of the total amount of manufacturers’ bonuses 
earned in the year together with amounts earned but not yet 
paid to the Group at the year end.  

We were able to reconcile those confirmations received to the 
amounts recorded in the underlying books with no significant 
differences noted. 

Where confirmations were not received from certain 
manufacturers we substantively tested a sample of bonuses 
and rebates by tracing to credit notes received from the 
manufacturer and cash received. There were no material 
issues arising from our testing. 

141 

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inchcape.com 141

 
 
 
 
 
 
 
 
Independent auditors’ report to the members of Inchcape plc continued 

Area of focus 

How our audit addressed the area of focus 

Carrying value of inventory 
Refer to page 87 (accounting policies) and page 122  
(note 17). 

As at 31 December 2015, inventory of £1.2 billion is held across 
multiple locations. Inventory should be recorded at the lower 
of cost and net realisable value, being selling price less 
estimated selling costs. 

As gross margins on sales of vehicle inventory can be low and 
inventory is sometimes sold at a loss, provisions are recorded 
against inventory to write it down to management’s best 
estimate of its recoverable amount. Management has 
established a formal provisioning policy based on historical 
performance and their future trading forecasts. 

Tax exposures and provisions 
Refer to page 87 (accounting policies) and page 112 (note 8)

The Group operates across a large number of tax jurisdictions 
and is subject to periodic challenges by local tax authorities 
on a range of tax matters during the normal course of 
business including transfer pricing, indirect taxes and 
transaction related tax matters. As at 31 December 2015,  
the Group had tax provisions for uncertain tax positions. 

Tax provisioning requires subjective judgements to be made 
by management about the expected ultimate settlement, if 
any, of a potential exposure. 

We considered the Group’s past trading performance, 
including testing the levels of losses incurred on vehicle sales 
historically and subsequent to the year-end, to evaluate the 
level of provisioning and to assess the reasonableness and 
accuracy of management’s provisioning methodology. 

We established that the inventory provisions were reasonable 
by recalculating the inventory provisions in each country, 
using the provisioning policy, and comparing the results  
with the actual provision level. 

We also verified the completeness and accuracy of any 
additional provisions made by management outside of its 
standard policy where specific events or circumstances 
warranted additional provisioning. 

Our testing confirmed that the provisions were reasonable. 

We assessed the Group’s process for identifying uncertain tax 
positions and the related accounting policy of provisioning for 
tax exposures and determined that it was appropriate.  

We used our tax specialists to gain an understanding of the 
current status of tax investigations and monitored changes  
in ongoing disputes by reading recent rulings and 
correspondence with local tax authorities, as well as external 
advice received by the Group where relevant, to establish that 
the tax provisions were appropriate. We also considered the 
status of recent and current tax audits and enquiries, the 
outturn of previous claims and the wider tax environment in 
each territory. 

We confirmed the appropriateness of the related disclosures 
about the tax provisions and contingencies in note 8. 

Our testing confirmed that the provisions were reasonable. 

How we tailored the audit scope 
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial 
statements as a whole, taking into account the geographic structure of the Group, the accounting processes and controls, 
and the industry in which the Group operates.  

The Group structure is organised into six geographic operating segments (Australasia, Europe, North Asia, South Asia, United 
Kingdom and Emerging Markets). The operating businesses are further categorised into two market channels – distribution  
and retail. The Group financial statements are a consolidation of 56 reporting units, comprising the Group’s operating 
businesses (within the six geographic segments and two market channels) and centralised functions. 

In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed at the 
reporting units by us, as the Group engagement team, or component auditors within PwC UK and from other PwC network firms 
and other firms operating under our instruction. Where the work was performed by component auditors, we determined the 
level of involvement we needed to have in the audit work at those reporting units to be able to conclude whether sufficient 
appropriate audit evidence had been obtained as a basis for our opinion on the Group financial statements as a whole. We 
conducted our audit work in 16 countries covering 22 reporting units. The reporting units where we conducted our audit work 
accounted for 89% of the Group’s revenues and 90% of the Group’s profit before tax. We instructed and maintained regular 
contact with the component audit teams we used and evaluated the outcome of their work; 7 components were visited  
by partners on the Group team. In response to the matter noted on page 59 of the report of the Audit Committee, we visited  
the opeartions in Chile and undertook certain limited specified procedures over the local balance sheet. 

This together with additional procedures performed at the Group level, including audit procedures over consolidation 
adjustments, treasury, post retirement benefits, goodwill and litigation provisions gave us the evidence we needed for our 
opinion on the Group financial statements as a whole. 

Materiality 
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. 
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and 
extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect  
of misstatements, both individually and on the financial statements as a whole.  

142 
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Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: 

Overall Group materiality 
How we determined it 
Rationale for benchmark applied  We believe that profit before taxation and exceptional items is the primary measure used 

£15.6 million (2014: £15.0 million). 
5% of profit before taxation and exceptional items. 

by the shareholders in assessing the performance of the Group, and is a generally 
accepted auditing benchmark. 

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £800,000  
(2014: £700,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. 

Going concern 
Under the Listing Rules we are required to review the Directors’ statement, set out on page 79, in relation to going concern.  
We have nothing to report having performed our review. 

Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation 
to the Directors’ statement about whether they considered it appropriate to adopt the going concern basis in preparing the 
financial statements. We have nothing material to add or to draw attention to.  

As noted in the Directors’ statement, the Directors have concluded that it is appropriate to adopt the going concern basis in 
preparing the financial statements. The going concern basis presumes that the Group has adequate resources to remain in 
operation, and that the Directors intend it to do so, for at least one year from the date the financial statements were signed.  
As part of our audit we have concluded that the Directors’ use of the going concern basis is appropriate. However, because 
not all future events or conditions can be predicted, these statements are not a guarantee as to the Group’s ability to continue 
as a going concern. 

Other required reporting 
Consistency of other information 
Companies Act 2006 opinion 
In our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial 
statements are prepared is consistent with the financial statements. 

ISAs (UK & Ireland) reporting 
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion: 

•  information in the Annual Report is: 

–  materially inconsistent with the information in the audited financial statements; or 
–  apparently materially incorrect based on, or materially inconsistent with, our knowledge of the  

Group acquired in the course of performing our audit; or 

–  otherwise misleading. 

We have no exceptions
to report. 

•  the statement given by the Directors on page 79, in accordance with provision C.1.1 of the UK 
Corporate Governance Code (“the Code”), that they consider the Annual Report taken as a 
whole to be fair, balanced and understandable and provides the information necessary for 
members to assess the Group’s performance, business model and strategy is materially 
inconsistent with our knowledge of the Group acquired in the course of performing our audit. 
•  the section of the Annual Report on pages 57 to 59, as required by provision C.3.8 of the Code, 

describing the work of the Audit Committee does not appropriately address matters 
communicated by us to the Audit Committee. 

We have no exceptions
to report. 

We have no exceptions 
to report. 

The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity  
of the Group 
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to: 

•  the Directors’ confirmation on page 56 of the Annual Report, in accordance with provision C.2.1 of 
the Code, that they have carried out a robust assessment of the principal risks facing the Group, 
including those that would threaten its business model, future performance, solvency or liquidity. 

We have nothing material 
to add or to draw 
attention to. 

•  the disclosures in the Annual Report that describe those risks and explain how they are being 

managed or mitigated. 

•  the Directors’ explanation on page 43 of the Annual Report, in accordance with provision C.2.2 of 
the Code, as to how they have assessed the prospects of the Group, over what period they have 
done so and why they consider that period to be appropriate, and their statement as to whether 
they have a reasonable expectation that the Group will be able to continue in operation and 
meet its liabilities as they fall due over the period of their assessment, including any related 
disclosures drawing attention to any necessary qualifications or assumptions. 

We have nothing material 
to add or to draw 
attention to. 

We have nothing material 
to add or to draw 
attention to. 

www.inchcape.com 

143 
inchcape.com 143

 
 
 
 
 
 
Independent auditors’ report to the members of Inchcape plc continued 

Under the Listing Rules we are required to review the Directors’ statement that they have carried out a robust assessment of  
the principal risks facing the Group and the Directors’ statement in relation to the longer-term viability of the Group. Our review 
was substantially less in scope than an audit and only consisted of making inquiries and considering the Directors’ process 
supporting their statements; checking that the statements are in alignment with the relevant provisions of the Code; and 
considering whether the statements are consistent with the knowledge acquired by us in the course of performing our audit.  
We have nothing to report having performed our review. 

Adequacy of information and explanations received 
Under the Companies Act 2006 we are required to report to you if, in our opinion, we have not received all the information  
and explanations we require for our audit. We have no exceptions to report arising from this responsibility.  

Directors’ remuneration 
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors’ remuneration 
specified by law are not made. We have no exceptions to report arising from this responsibility.  

Corporate governance statement 
Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to ten further 
provisions of the Code. We have nothing to report having performed our review. 

Responsibilities for the financial statements and the audit 
Our responsibilities and those of the Directors 
As explained more fully in the Directors’ responsibilities set out on page 79, the Directors are responsible for the preparation of  
the financial statements and for being satisfied that they give a true and fair view. 

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs  
(UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. 

This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance  
with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept  
or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may 
come save where expressly agreed by our prior consent in writing. 

What an audit of financial statements involves 
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give 
reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error.  
This includes an assessment of:  

•  whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and  

adequately disclosed;  

•  the reasonableness of significant accounting estimates made by the Directors; and  
•  the overall presentation of the financial statements.  

We primarily focus our work in these areas by assessing the Directors’ judgements against available evidence, forming our  
own judgements, and evaluating the disclosures in the financial statements. 

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to 
provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, 
substantive procedures or a combination of both.  

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with  
the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially 
inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent  
material misstatements or inconsistencies we consider the implications for our report. 

Other matter 
We have reported separately on the Company financial statements of Inchcape plc for the year ended 31 December 2015  
and on the information in the Directors’Remuneration Report that is described as having been audited. 

Neil Grimes 
(Senior Statutory Auditor)  
for and on behalf of PricewaterhouseCoopers LLP 
Chartered Accountants and Statutory Auditors 
London 
14 March 2016 

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Company statement of financial position 
As at 31 December 2015 

Fixed assets 
Investment in subsidiaries 
Current assets 
Trade and other receivables: 
– Amounts due within one year 
– Amounts due after more than one year 
Cash and cash equivalents 

Trade and other payables – amounts falling due within one year 
Net current assets  

Total assets less current liabilities 

Trade and other payables – amounts falling due after more than one year 

Provisions for liabilities  
Net assets 

Equity 
Ordinary shares 
Share premium 
Capital redemption reserve 
Retained earnings 
Total shareholders’ funds 

Notes 

2015
£m 

2014
£m 

3 

1,631.5

1,635.7

4 
4 
5 

6 

7 

9 

11 

95.6
300.6
11.6
407.8

37.1
352.7
10.4
400.2

(6.8)
401.0

(5.7)
394.5

2,032.5

2,030.2

(758.3)

(683.1)

(4.6)
1,269.6

(4.6)
1,342.5

43.8
146.7
136.8
942.3
1,269.6

45.0
146.7
135.6
1,015.2
1,342.5

The financial statements on pages 145 to 157 were approved by the Board of Directors on 14 March 2016 and were signed  
on its behalf by: 

Stefan Bomhard, 
Group Chief Executive 

Registered Number: 609782 

Inchcape plc 

Ken Hanna, 
Chairman

www.inchcape.com 

145 
inchcape.com 145

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Company statement of changes in equity 
For the year ended 31 December 2015 

  Notes 

Share capital
£m 

Share premium 
£m 

At 1 January 2014 (as previously reported) 
FRS 101 transitional adjustment 

At 1 January 2014 

Profit for the year  
Total comprehensive income for the year  

Dividends 
Issue of ordinary share capital 
Net disposal of own shares by the Inchcape 
Employee Trust 
Share buy back programme 
Share-based payments, net of tax 
At 1 January 2015  

Profit for the year 
Total comprehensive income for the year  

Dividends 
Net purchase of own shares by the Inchcape 
Employee Trust 
Share buy back programme 
Share-based payments, net of tax 
At 31 December 2015 

13

12

11

12

11

46.5
–

46.5

–
–

–
–

–
(1.5)
–
45.0

–
–

–

–
(1.2)
–
43.8

145.7
–

145.7

–
–

–
1.0

–
–
–
146.7

–
–

–

–
–
–
146.7

Capital 
redemption 
reserve 
£m 

134.1 
– 

134.1 

– 
– 

– 
– 

– 
1.5 
– 
135.6 

– 
– 

– 

– 
1.2 
– 
136.8 

Retained 
earnings  
£m 

1,083.1 
1.2 

1,084.3 

102.3 
102.3 

(81.5) 
– 

1.2 
(100.0) 
8.9 
1,015.2 

Total
£m 

1,409.4
1.2

1,410.6

102.3
102.3

(81.5)
1.0

1.2
(100.0)
8.9
1,342.5

119.1 
119.1 

119.1
119.1

(91.1) 

(91.1)

(18.9) 
(91.4) 
9.4 
942.3 

(18.9)
(91.4)
9.4
1,269.6

Share-based payments include a net tax charge of £0.2m (deferred tax charge of £0.8m and a current tax credit of £0.6m)  
(2014 – deferred tax charge of £0.6m). 

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Accounting policies 

General information 
These financial statements are prepared for Inchcape plc (the Company) for the year ended 31 December 2015.  
The Company is the ultimate parent entity of the Inchcape Group (the Group). 

Basis of preparation 
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure 
Framework (FRS 101). The Company has transitioned to FRS 101 for all periods presented. Transition tables showing all  
material adjustments are disclosed in note 13. 

The financial statements are prepared under the historical cost convention modified for fair values in accordance with  
the Companies Act 2006. As permitted by Section 408 of the Companies Act 2006, no separate profit and loss account 
is presented for the Company. 

The preparation of financial statements in conformity with FRS 101 requires the use of certain critical accounting estimates.  
The Directors of Inchcape plc manage the Group’s risks at a group level rather than an individual business unit or company 
level. Further information on these risks and uncertainties, in the context of the Group as a whole, are included within the  
Group disclosures on pages 40 to 43. 

The following exemptions from the requirements of IFRS have been applied in the preparation of these financial statements,  
in accordance with FRS 101: 

•  Paragraphs 45(b) and 46 to 52 of IFRS 2, ‘Share-based payment’ (details of the number and weighted average exercise  

price of share options, and how the fair value of goods and services received was determined) 

•  IFRS 7, ‘Financial Instruments: Disclosures’ 
•  Paragraphs 91 to 99 of IFRS 13, ‘Fair value measurement’ (disclosure of valuation techniques and inputs used for fair  

value measurement of assets and liabilities) 

•  Paragraph 38 of IAS 1, ‘Presentation of financial statements’ comparative information requirements in respect of: 

•  paragraph 73(e) of IAS 16, ‘Property, plant and equipment’; 
•  paragraph 118(e) of IAS 38, ‘Intangible assets’ (reconciliations between the carrying amount at the beginning and  

end of the period) 

•  The following paragraphs of IAS 1, ‘Presentation of financial statements’: 

•  10(d) (statement of cash flows) 
•  10(f) (a statement of financial position as at the beginning of the preceding period when an entity applies an accounting  
policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in  
its financial statements), 

•  16 (statement of compliance with all IFRS), 
•  38A (requirement for minimum of two primary statements, including cash flow statements), 
•  38B-D (additional comparative information), 
•  40A-D (requirements for a third statement of financial position), 
•  111 (cash flow statement information), and 
•  134-136 (capital management disclosures) 

•  IAS 7, ‘Statement of cash flows’ 
•  Paragraph 30 and 31 of IAS 8, ‘Accounting policies, changes in accounting estimates and errors’ (requirement for the 

disclosure of information when an entity has not applied a new IFRS that has been issued but is not yet effective) 

•  Paragraph 17 of IAS 24, ‘Related party disclosures’ (key management compensation) 
•  The requirements in IAS 24, ‘Related party disclosures’ to disclose related party transactions entered into between two  

or more members of a group. 

Going concern 
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue  
in operation. Accordingly, the Directors are satisfied that it is appropriate to adopt the going concern basis in preparing the 
Annual Report and Accounts. 

Foreign currencies 
Monetary assets and liabilities in foreign currencies are translated into Sterling at closing rates of exchange and differences  
are taken to the income statement. 

Finance costs 
Finance costs consist of interest payable on the Private Placement borrowing. Costs are recognised as an expense in the  
period in which they are incurred. 

Investments 
Investments in subsidiaries are stated at cost, less provisions for impairment. 

www.inchcape.com 

147 
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Accounting policies continued 

Deferred tax 
Deferred income tax is accounted for using the liability method in respect of temporary differences arising from differences 
between the tax bases of assets and liabilities and their carrying amounts in the financial statements.  

In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised  
to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be 
utilised. Such assets and liabilities are not recognised if the temporary difference is due to goodwill arising on a business 
combination, or to an asset or liability, the initial recognition of which does not affect either taxable or accounting income. 

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, joint ventures  
and associates, except where the Company is able to control the reversal of the temporary difference and it is probable that 
the temporary difference will not reverse in the foreseeable future. 

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is 
settled using rates enacted or substantively enacted at the end of the reporting period. Deferred tax is charged or credited in 
the income statement, except when it relates to items credited or charged directly to shareholders’ equity, in which case the 
deferred tax is also dealt with in shareholders’ equity. 

Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to 
settle balances net. 

Provisions 
Provisions are recognised when the Company has a present obligation in respect of a past event, it is more likely than not that 
an outflow of resources will be required to settle the obligation and where the amount can be reliably estimated. Provisions are 
discounted when the time value of money is considered material. 

Share capital 
Ordinary shares are classified as equity. 

Where the Company purchases its own equity share capital (treasury shares), the consideration paid is deducted from 
shareholders’ funds until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or 
reissued, any consideration received is included in shareholders’ funds. 

Dividends 
Final dividends proposed by the Board of Directors and unpaid at the year end are not recognised in the financial statements 
until they have been approved by the shareholders at the Annual General Meeting. Interim dividends are recognised when 
they are paid. 

Share-based payments 
The Company operates various share-based award schemes. The fair value at the date at which the share-based awards are 
granted is recognised in the income statement (together with a corresponding increase in shareholders’ equity) on a straight 
line basis over the vesting period, based on an estimate of the number of shares that will eventually vest. At the end of each 
reporting period, the Company revises its estimates of the number of awards that are expected to vest. The impact of any 
revision is recognised in the income statement with a corresponding adjustment to equity. 

For equity-settled share-based awards, the services received from employees are measured by reference to the fair value of the 
awards granted. With the exception of the Save As You Earn scheme, the vesting of all share-based awards under all schemes 
is solely reliant upon non-market conditions, therefore no expense is recognised for awards that do not ultimately vest. Where an 
employee cancels a Save As You Earn award, the charge for that award is recognised as an expense immediately, even 
though the award does not vest. 

Financial instruments 
The Company’s policies on the recognition, measurement and presentation of financial instruments under IFRS 7 are the same 
as those set out in the Group’s accounting policies on pages 87 to 93. 

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Inchcape Annual Report and Accounts 2015

 
Notes to the financial statements 

1 Auditors’ remuneration 
The Company incurred £0.1m (2014 – £0.1m) in relation to UK statutory audit fees for the year ended 31 December 2015. 

2 Directors’ remuneration 

Wages and salaries 
Social security costs 
Pension costs 

2015
£m 

4.1
0.3
0.4
4.8

2014
£m 

4.5
0.5
0.5
5.5

Further information on Executive Directors’ emoluments and interests is given in the Directors’ Report on Remuneration which 
can be found on pages 63 to 77. 

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3 Investment in subsidiaries 

Cost 
At 1 January 
Additions  
Disposals 
At 31 December 

Provisions 
At 1 January 
Provisions for impairment 
Disposals 
At 31 December 

Net book value 

2015
£m 

2014
£m 

1,712.6
–
–
1,712.6

1,712.6
–
–
1,712.6

(76.9)
(4.2)
–
(81.1)

(75.1)
(1.8)
–
(76.9)

1,631.5

1,635.7

The Directors believe that the carrying value of the individual investments is supported by their underlying net assets. 

An impairment charge of £4.2m has been recognised in the year (2014 – £1.8m) to ensure that the carrying value of the 
individual investments is stated at the lower of cost and estimated recoverable amount.  

4 Trade and other receivables 

Amounts due within one year 
Amounts owed by Group undertakings 

Amounts due after more than one year 
Deferred tax asset (note 8) 
Amounts owed by Group undertakings 

2015
£m 

2014
£m 

95.6
95.6

1.7
298.9
300.6

37.1
37.1

3.5
349.2
352.7

Amounts owed by Group undertakings that are due within one year consist of current account balances that are interest free 
and repayable on demand, as well as intercompany loans that bear interest at rates linked to source currency base rates. 

Amounts owed by Group undertakings that are due after more than one year bear interest at rates linked to source currency  
base rates. 

5 Cash and cash equivalents 

Cash and cash equivalents 

6 Trade and other payables – amounts falling due within one year 

Amounts owed to Group undertakings 
Other taxation and social security payable 
Other creditors 

Amounts owed to Group undertakings are interest free and repayable on demand. 

2015
£m 

11.6

2015
£m 

2.2
1.4
3.2
6.8

2014
£m 

10.4

2014
£m 

0.7
2.2
2.8
5.7

www.inchcape.com 

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Notes to the financial statements continued 

7 Trade and other payables – amounts falling due after more than one year 

Amounts owed to Group undertakings  
Private Placement 

2015
£m 

461.9
296.4
758.3

2014
£m 

403.9
279.2
683.1

The Company has US$435.8m outstanding under the Private Placement borrowing: US$275m is repayable in 2017 and bears 
interest at a fixed rate of 5.94% per annum; and US$160.8m is repayable in 2019 and bears interest at a fixed rate of 6.04% per 
annum. 

Amounts owed to Group undertakings are repayable in 2017 and bear interest at rates linked to source currency base rates.  

8 Deferred tax 

At 1 January 2015 (see note 13) 
Charged to equity 
Charged to the income statement 
At 31 December 2015 

9 Provisions for liabilities  

At 1 January 
Released to the income statement 
At 31 December 

Share-
based 
payments 
£m 

Other timing 
differences
£m 

1.8 
(0.8) 
(0.3) 
0.7 

1.7
–
(0.7)
1.0

2015
£m 

4.6
–
4.6

Total
£m 

3.5
(0.8)
(1.0)
1.7

2014
£m 

4.6
–
4.6

Provision has been made for warranties, indemnities and other litigation issues in relation to motors and non-motors business 
exits, based on expected outcomes. These provisions are expected to be settled within the next three to five years. 

10 Contingent liability 

The Company is party to composite cross guarantees between banks and its subsidiaries. The Company’s contingent liability 
under these guarantees at 31 December 2015 was £11.6m (2014 – £10.4m), equal to the carrying value of its cash and cash 
equivalents at the end of the period (see note 5). 

11 Share capital  
a. Allotted, called up and fully paid up 

Ordinary shares 
At 1 January 
Allotted under share option schemes 
Cancelled under share buy back  
At 31 December 

2015 
Number 

2014  
Number   

2015
£m 

2014
£m 

448,741,789 463,808,537   
277,362   
(11,931,693) (15,344,110)  
436,810,096 448,741,789   

–

45.0
–
(1.2)
43.8

46.5
–
(1.5)
45.0

b. Share buy back programme 
During the year, the Company repurchased 11,931,693 (2014 – 15,344,110) of its own shares through purchases on the London 
Stock Exchange, at a cost of £90.8m (2014 – £99.4m). The shares repurchased during the year were cancelled, with none held 
within treasury shares at the end of the reporting period. An amount of £1.2m (2014 – £1.5m), equivalent to the nominal value  
of the cancelled shares, has been transferred to the capital redemption reserve. Costs of £0.6m (2014 – £0.6m) associated with 
the transfer to the Company of the repurchased shares and their subsequent cancellation have been charged to the profit and 
loss reserve. 

c. Substantial shareholdings 
Details of substantial interests in the Company’s issued ordinary share capital received by the Company at 14 March 2016 
under the provisions of the Companies Act 2006 have been disclosed in the significant shareholdings section of the Corporate 
Governance Report.  

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11 Share capital continued 
d. Share options 
At 31 December 2015, options to acquire ordinary shares of 10.0p each in the Company up to the following numbers under the 
schemes below were outstanding as follows:  

Number of ordinary  
shares of 10.0p each 

Exercisable until 

Option 
price (£) 

Number of ordinary  
shares of 10.0p each 

Exercisable until 

Option 
price (£) 

The Inchcape 1999 Share Option Plan  
– approved (Part II – UK) 

The Inchcape SAYE Share Option  
Scheme – approved 

11,501 

6,339 

19 May 2019 

7 April 2020 

2.00   39,384 

3.10   596,694 

  522,623 

  989,790 

1 May 2016 

1 May 2017 

1 May 2018 

1 May 2019 

3.07

4.76

5.40

5.78

– unapproved (Part I – UK) 

  Recruitment and Retention Plan 

2,501 

5,449 

19 May 2019 

7 April 2020 

– unapproved overseas (Part I – Overseas) 

306,329 

58,058 

19 May 2019 

7 April 2020 

2.00   205,125 

31 March 2025 

0.10

3.10  

2.00  

3.10  

Included within the retained earnings reserve are 631,253 (2014 – 1,272,161) ordinary shares in the Company held by the 
Inchcape Employee Trust, a general discretionary trust whose beneficiaries include current and former employees of the Group 
and their dependants. The book value of these shares at 31 December 2015 was £4.5m (2014 – £27.2m). The market value of 
these shares at both 31 December 2015 and 14 March 2016 was £5.0m and £4.5m respectively (31 December 2014 – £9.2m,  
9 March 2015 – £9.4m). 

e. Share-based remuneration 
Inchcape plc has two employees, the Group Chief Executive and the Group Finance Director. 

The terms and conditions of the Company’s share-based payment plans are detailed in the Directors’ Report on Remuneration. 

The charge arising from share-based transactions during the year was £1.9m (2014 – £1.3m), all of which is equity-settled. 

The weighted average exercise price of shares exercised during the period was £nil (2014 – £2.99). 

The weighted average remaining contractual life for the share options outstanding at 31 December 2015 is 9.2 years (2014 – 2.0 
years) and the range of exercise prices for options outstanding at the end of the year was £0.10 to £5.78 (2014 – £3.40 to £6.31). 

www.inchcape.com 

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Notes to the financial statements continued 

12 Dividends 
The following dividends were paid by the Company: 

Interim dividend for the six months ended 30 June 2015 of 6.8p per share  
(30 June 2014 – 6.3p per share) 
Final dividend for the year ended 31 December 2014 of 13.8p per share  
(31 December 2013 – 11.7p per share) 

2015 
£m 

30.0 

61.1 
91.1 

2014
£m 

28.5

53.0
81.5

A final proposed dividend for the year ended 31 December 2015 of 14.1p per share amounting to £61.0m is subject to 
approval by shareholders at the Annual General Meeting and has not been included as a liability as at 31 December 2015. 

13 Transition to FRS 101 
As disclosed within the Basis of Preparation section on page 147, these financial statements for the year ended 31 December 
2015 are the first that the Company has prepared in accordance with FRS 101. Accordingly, the Company has prepared 
individual financial statements that comply with FRS 101 applicable for all periods beginning on or after 1 January 2014. 

In preparing these financial statements, the Company has started from an opening balance sheet as at 1 January 2014  
and made those changes in accounting policies and other restatements required for the first-time adoption of FRS 101. 

The only material adjustment to the Company’s financial statements as a result of the transition to FRS 101 has been in respect 
of deferred tax. Under IFRS deferred tax is defined in relation to temporary differences between carrying values and their related 
tax bases, rather than timing differences in the income statement. 

The table below shows the impact of the changes to the deferred tax asset: 

At 1 January 2014 
(Charged) / credited to the income statement 
Charged to equity 
At 31 December 2014 

As previously  
reported 
£m 

FRS 101  
adjustment 
£m 

As reported
£m 

2.7 
(0.3) 
– 
2.4 

1.2 
0.5 
(0.6)
1.1 

3.9
0.2
(0.6)
3.5

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14 Related Undertakings 
In accordance with Section 409 of the Companies Act 2006 a full list of subsidiaries, associates and joint ventures as at 31 
December 2015 is shown below. 

(i)

(ii)

(iii)
(iv)

Subsidiaries 

Name 

AutoNexus Pty Ltd 
Bespoke Automotive Australia Pty Ltd 
Inchcape Australia Ltd  
Inchcape Automotive Retail Pty Ltd 
Keystar Motors Pty Ltd 
SMLB Pty Ltd 
Subaru (Australia) Ltd 
TCH Unit Trust 
Trivett Automotive Group Pty Ltd
Trivett Bespoke Automotive Pty Ltd
Trivett Classic Garage Pty Ltd 
Trivett Classic Group Finance Pty Ltd 
Trivett Classic Holdings Pty Ltd 
Trivett Classic Pty Ltd 
Trivett Motorcycles Pty Ltd 
Trivett P/L 
Trivett Tyres Pty Ltd 
Autoproducts NV 
Car Security NV 
Garage Francorchamps SA 
Inchcape Retail Belgium 
Toyota Belgium NV/SA 
Champion Motors (Brunei) Sdn Bhd 
NBT (Brunei) Sdn Bhd 
NBT Services Sdn Bhd 
Inchcape Brokerage Bulgaria EOOD 
TM Auto EOOD 
Toyota Balkans EOOD 
Mobility Services Chile SA 
Universal Motors SA 
Williamson Balfour Motors SA 
Williamson Balfour SA 
Inchcape Investment Holding (China) Ltd 
Jiujiang Inchcape Premium Auto Sales & Service Co Ltd
Nanchang Inchcape Premium Auto Sales & Service Co Ltd
Shanghai Hongshi Consultancy Co Ltd 
Shanghai Bell Rock Auto Sales & Service Co Ltd 
Shanghai Inchcape Auto Sales & Service Co Ltd 
Shaoxing Inchcape Lexus Auto Sales & Service Co Ltd
Shaoxing Inchcape Premium Auto Sales & Service Co Ltd
IB Enterprises Ltd 
Red Sea Automotive FZCO 
Inchcape Motors Estonia OU 
The Motor & Engineering Company Of Ethiopia (Moenco) Ltd
Inchcape Motors Finland Oy 

Percentage owned 

Country of incorporation 

100%
100%
100%
100%
100%
100%
90%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
70%
70%
70%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
94%
100%

Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Belgium
Belgium
Belgium
Belgium
Belgium
Brunei
Brunei
Brunei
Bulgaria
Bulgaria
Bulgaria
Chile
Chile
Chile
Chile
China
China
China
China
China
China
China
China
Cook Islands
Djibouti
Estonia
Ethiopia
Finland

www.inchcape.com 

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Notes to the financial statements continued 

Name 

British Providence SA 
Eurolease Fleet Services SA 
Inchcape Incredit SA 
Polis Inchcape Thessaloniki SA 
Polis Inchcape Athens SA 
Toyota Hellas SA 
Atkins Kroll Inc 
British Motors Ltd 
Crown Motors Development Ltd
Crown Motors Ltd 
Future Motors Ltd 
Inchcape Asia Pacific Ltd 
Inchcape Finance (HK) Ltd 
Inchcape Hong Kong Ltd 
Inchcape Motor Services Ltd 
Inchcape South China Ltd 
Intec Engineering Ltd 
Nova Motors Ltd 
Nova Motors (Macao) Ltd 
Inchcape Finance (Ireland) Ltd 
Distribution Services Cote d'Ivoire SA 
Toyota Services Afrique SA 
Baltic Motors Imports SIA 
Baltijas Ipasumum Fonds SIA 
BM Lizings SIA 
Ermans SIA 
Inchcape BM Auto SIA 
Inchcape Motors Latvia SIA
Ventmotors SIA 
UAB Autovista 
UAB Autovytaras 
UAB Inchcape Motors 
Car Company Luxembourg 
Grand Garage de Luxembourg
Jaguar Luxembourg 

Yat Fung Motors Ltd 

Percentage owned 

Country of incorporation 

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
67%
67%
67%
100%
100%
100%

100%

(v)

Greece
Greece
Greece
Greece
Greece
Greece
Guam 
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Ireland 
Ivory Coast
Ivory Coast
Latvia 
Latvia 
Latvia 
Latvia 
Latvia 
Latvia 
Latvia 
Lithuania
Lithuania
Lithuania
Luxembourg
Luxembourg
Luxembourg

Macau

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Percentage owned 

Country of incorporation 

Toyota Auto Center DOOEL 
Inchcape Financial Holdings Cooperatief WA 
Inchcape Funding BV 
Inchcape International Group BV
Inchcape T Property BV 
Inchcape T.B.V. 
Inchcape Moscow Holdings BV 
Inchcape Moscow Motors BV 
Olimp BV 
Inchcape Motors NZ Ltd 
lIaother SA 
Ilachile SA 
Inchcape Motors Peru SA 
IMP Distribuidora SA 
Inchcape Motors Polska Sp z.o.o
Interim Cars Sp z.o.o 
Inchcape Motors Srl 
Inchape Real Estate Srl 
Toyota Romania Srl 
Inchcape Management Services Rus LLC 
Inchcape Olimp LLC 
Inchcape T LLC 
LLC Autopark 
LLC Autoproject 
LLC Borishof 1 
LLC Concord 
LLC Inchcape Holding 
LLC Musa Motors JLR 
LLC Musa Motors Volvo 
LLC Orgtekhstroy 
Atkins Kroll (Saipan) Inc 
Borneo Motors (Singapore) Pte Ltd 
Century Motors (Singapore) Ltd
Champion Motors (1975) Pte Ltd
Inchcape Automotive Services Pte Ltd 
Inchcape Motors Private Ltd 

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

Macedonia
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
New Zealand
Panama
Panama
Peru 
Peru 
Poland 
Poland 
Romania
Romania
Romania
Russia 
Russia 
Russia 
Russia 
Russia 
Russia 
Russia 
Russia 
Russia 
Russia 
Russia 
Saipan
Singapore
Singapore
Singapore
Singapore
Singapore

www.inchcape.com 

155 
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Notes to the financial statements continued 

Name 

Percentage owned 

Country of incorporation 

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

(vi)

(vii)

(viii)

United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom

Armstrong Massey (York) Ltd 
Armstrong Massey Holding Ltd 
Autobytel Ltd 
Automobiles of Distinction Ltd 
Bates Motors (Belcher) Ltd 
Casemount Holdings Ltd 
Castle Motors (York) Ltd 
Cavendish 1 Ltd 
Chapelgate Holdings Ltd 
Chapelgate Motors Ltd 
D J Smith Ltd 
Dane Motor Company (Chester) Ltd 
European Motor Holdings Ltd 
Ferrari Concessionaires Ltd 
Gerard Mann Ltd 
H A Fox Ltd 
Inchcape Baltic Motors Ltd 
Inchcape (Belgium) Ltd 
Inchcape BMI Ltd 
Inchcape Corporate Services Ltd
Inchcape East (2) Ltd 
Inchcape East (Acre) Ltd 
Inchcape East (Brook) Ltd 
Inchcape East (Hill) Ltd 
Inchcape East (Holdings) Ltd 
Inchcape East (Properties) Ltd 
Inchcape East Ltd 
Inchcape Estates Ltd 
Inchcape Finance plc 
Inchcape Fleet Solutions Ltd 
Inchcape Hellas Funding (unlimited) 
Inchcape Hellas UK (unlimited) 
Inchcape Imperial (unlimited) 
Inchcape Investments (no 1) Ltd
Inchcape Investments (no 2) Ltd
Inchcape International Holdings Ltd 
Inchcape Investments & Asset Management Ltd 
Inchcape Latvia Ltd 
Inchcape Management (Services) Ltd 
Inchcape Midlands Ltd 
Inchcape Motors International Ltd
Inchcape Motors Pension Trust Ltd 
Inchcape Pension Trustee Ltd 
Inchcape Overseas Ltd 
Inchcape North West Group Ltd
Inchcape North West Ltd 
Inchcape Park Lane Ltd 
Inchcape Retail Ltd 
Inchcape Russia (UK) Ltd 
Inchcape (Singapore) Ltd 

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Inchcape Trade Parts Ltd 
Inchcape Transition Ltd 
Inchcape UK Ltd 
Inchcape UK Corporate Management Ltd 
James Edwards (Chester) Ltd 
Kenning Motor Group Ltd 
L&C Auto Services (Croydon) Ltd
L&C Auto Services Ltd 
L&C Banstead Ltd 
Malton Motors Fleet Ltd 
Malton Motors Ltd 
Mann Egerton & Co Ltd 
Mill Garages Ltd 
Nexus Corporation Ltd 
Normand Heathrow Ltd 
Normand Ltd 
Normand Motor Group Ltd 
Normand Trustees Ltd 
Northfield Garage (Tetbury) Ltd 
Notneeded No. 144 Ltd 
Notneeded No. 145 Ltd 
Packaging Industries Ltd 
Penta Watford Ltd 
Smith Knight Faye (Holdings) Ltd
Smith Knight Faye Ltd 
St James’s Insurance Ltd 
St Mary Axe Securities Ltd 
The Cooper Group Ltd 
Tozer International Holdings Ltd 
Tozer Kemsley Millbourn Automotive Ltd 
Wyvern (Wrexham) Ltd 
Baltic Motors Corporation 
SS Acquisition Corporation 

Joint ventures 

Name 

Teffin SA 
Unifinance SA 
Enterprise Car Finance Ltd 
Inchcape Financial Services Ltd

(ix)
(x)

Percentage owned 

Country of incorporation 

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
88%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United States of America
United States of America

Percentage owned 

Country of incorporation 

50%
60%
49%
49%

(xi)
(xii)

Greece
Greece
United Kingdom
United Kingdom

Unless stated below, all holdings have one type of ordinary share capital: 

(i)  Ordinary A and Ordinary B shares 

(ii)  Ordinary shares, B Class shares, J Class shares and L Class shares 

(iii)  Ordinary shares and E Class shares 

(iv)  Ordinary shares, A Class shares, C Class shares, D Class shares and E Class shares 

(v)  Ordinary shares, redeemable cumulative preference shares and non-redeemable preference shares 

(vi)  Ordinary shares, Ordinary A shares and 8% non-cumulative redeemable preference shares 

(vii)  Ordinary shares and redeemable cumulative preference shares 

(viii) Ordinary shares and redeemable cumulative preference shares 

(ix)  Ordinary A and Ordinary B shares 

(x)  Ordinary A and Ordinary B shares 

(xi)  Ordinary A and Ordinary B shares 

(xii)  Ordinary A and Ordinary B shares 

www.inchcape.com 

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Independent auditors’ report to the members of Inchcape plc 

Report on the Company financial statements 
Our opinion  
In our opinion, Inchcape plc’s Company financial statements  
(the “financial statements”): 

Adequacy of accounting records and information and 
explanations received 
Under the Companies Act 2006 we are required to report  
to you if, in our opinion: 

•  give a true and fair view of the state of the Company’s 

affairs as at 31 December 2015; 

•  have been properly prepared in accordance with United 
Kingdom Generally Accepted Accounting Practice; and 
•  have been prepared in accordance with the requirements  

of the Companies Act 2006. 

What we have audited 
The financial statements, included within the Annual Report  
& Accounts 2015 (the “Annual Report”), comprise: 

•  Company statement of financial position as at 31 

December 2015; 

•  Company statement of changes in equity for the year  

then ended; and 

•  the notes to the financial statements, which include a 
summary of significant accounting policies and other 
explanatory information.  

Certain required disclosures have been presented elsewhere  
in the Annual Report, rather than in the notes to the financial 
statements. These are cross-referenced from the financial 
statements and are identified as audited. 

The financial reporting framework that has been applied in 
the preparation of the financial statements is United Kingdom 
Accounting Standards, comprising FRS 101 “Reduced 
Disclosure Framework” and applicable law (United Kingdom 
Generally Accepted Accounting Practice). 

Other required reporting 
Consistency of other information 
Companies Act 2006 opinion 
In our opinion, the information given in the Strategic Report  
and the Directors’ Report for the financial year for which the 
financial statements are prepared is consistent with the  
financial statements.  

ISAs (UK & Ireland) reporting 
Under International Standards on Auditing (UK and Ireland) 
(“ISAs (UK & Ireland)”) we are required to report to you if, in 
our opinion, information in the Annual Report is: 

•  materially inconsistent with the information in the audited 

financial statements; or 

•  apparently materially incorrect based on, or materially 

inconsistent with, our knowledge of the Company acquired 
in the course of performing our audit; or 

•  otherwise misleading. 

We have no exceptions to report arising from this responsibility. 

•  we have not received all the information and explanations 

we require for our audit; or 

•  adequate accounting records have not been kept by the 

Company, or returns adequate for our audit have not been 
received from branches not visited by us; or 

•  the financial statements and the part of the Directors’ 

Remuneration Report to be audited are not in agreement  
with the accounting records and returns. 

We have no exceptions to report arising from this responsibility. 

Directors’ remuneration 
Directors’ remuneration report – Companies Act 2006 opinion 
In our opinion, the part of the Directors’ Remuneration Report  
to be audited has been properly prepared in accordance 
with the Companies Act 2006. 

Other Companies Act 2006 reporting 
Under the Companies Act 2006 we are required to report  
to you if, in our opinion, certain disclosures of Directors’ 
remuneration specified by law are not made. We have  
no exceptions to report arising from this responsibility. 

Responsibilities for the financial statements and  
the audit 
Our responsibilities and those of the Directors  
As explained more fully in the Directors’ Responsibilities set out 
on page 79, the Directors are responsible for the preparation 
of the financial statements and for being satisfied that they 
give a true and fair view.  

Our responsibility is to audit and express an opinion on the 
financial statements in accordance with applicable law and  
ISAs (UK & Ireland). Those standards require us to comply with  
the Auditing Practices Board’s Ethical Standards for Auditors.  

This report, including the opinions, has been prepared for and 
only for the Company’s members as a body in accordance 
with Chapter 3 of Part 16 of the Companies Act 2006 and for 
no other purpose. We do not, in giving these opinions, accept 
or assume responsibility for any other purpose or to any other 
person to whom this report is shown or into whose hands it 
may come save where expressly agreed by our prior consent 
in writing. 

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158 

 
 
 
What an audit of financial statements involves 
We conducted our audit in accordance with ISAs (UK & 
Ireland). An audit involves obtaining evidence about the 
amounts and disclosures in the financial statements sufficient 
to give reasonable assurance that the financial statements 
are free from material misstatement, whether caused by fraud 
or error. This includes an assessment of: 

•  whether the accounting policies are appropriate to the 
Company’s circumstances and have been consistently  
applied and adequately disclosed;  

•  the reasonableness of significant accounting estimates  

made by the Directors; and  

•  the overall presentation of the financial statements.  

We primarily focus our work in these areas by assessing the 
Directors’ judgements against available evidence, forming  
our own judgements, and evaluating the disclosures in the 
financial statements. 

We test and examine information, using sampling and other 
auditing techniques, to the extent we consider necessary to 
provide a reasonable basis for us to draw conclusions. We  
obtain audit evidence through testing the effectiveness of 
controls, substantive procedures or a combination of both. 

In addition, we read all the financial and non-financial 
information in the Annual Report to identify material 
inconsistencies with the audited financial statements and to 
identify any information that is apparently materially incorrect 
based on, or materially inconsistent with, the knowledge 
acquired by us in the course of performing the audit. If we 
become aware of any apparent material misstatements or 
inconsistencies we consider the implications for our report. 

Other matter 
We have reported separately on the Group financial 
statements of Inchcape plc for the year ended  
31 December 2015.  

Neil Grimes 
(Senior Statutory Auditor) 
for and on behalf of PricewaterhouseCoopers LLP 
Chartered Accountants and Statutory Auditors 
London 
14 March 2016 

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Shareholder Information

Registered office
Inchcape plc
22a St James’s Square 
London SW1Y 5LP 
Tel: +44 (0) 20 7546 0022 
Fax: +44 (0) 20 7546 0010 
Registered number: 609782

Advisors
Auditors
PricewaterhouseCoopers LLP 
Chartered Accountants and 
Registered Auditors

Share registrars
Computershare Investor Services PLC 
Registrar’s Department, The Pavilions 
Bridgwater Road 
Bristol BS99 7NH 
Tel: +44 (0) 370 707 1076

Solicitors
Slaughter and May

Corporate brokers
Deutsche Bank 
JP Morgan Cazenove

Inchcape PEPs
Individual Savings Accounts (ISAs) replaced Personal Equity 
Plans (PEPs) as the vehicle for tax efficient savings. Existing PEPs 
may be retained. Inchcape PEPs are managed by The Share 
Centre Ltd, who can be contacted at PO Box 2000, Oxford 
House, Oxford Road, Aylesbury, Buckinghamshire HP21 8ZB 
Tel: +44 (0) 1296 414144

Inchcape ISA
Inchcape has established a Corporate Individual Savings 
Account (ISA). This is managed by Equiniti Financial Services 
Limited, Aspect House, Spencer Road, Lancing, West Sussex 
BN99 6DA 
Tel: 0870 300 0430

International callers: 
Tel: +44 121 441 7560 
More information is available at www.shareview.com

Financial calendar
Annual General Meeting
26 May 2016

Announcement of 2016 Interim Results
28 July 2016

160

Inchcape Annual Report and Accounts 2015

Explore our website for access to our latest  
Annual Report and more. 

The 2015 Online Annual Report includes:

•  A Vision and Strategy for the Future
•  a searchable PDF of the Annual Report 
•  download prior year Annual Reports
•  Inchcape videos – watch and learn more about Inchcape and what we do

www.inchcape.com/annualreport

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Inchcape plc

22a St James’s Square  
London SW1Y 5LP

T +44 (0) 20 7546 0022 
F +44 (0) 20 7546 0010

www.inchcape.com 
Registered number 609782