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Annual Report and Accounts 2020
Strategic report
2 Chairman’s welcome
4 Chief Executive’s review
6 Group Executive Committee
8 Strategy
How we generate value
10 OEM partnerships
12 Our business model
12
12 Our routes to market
13 Our value chain
17 Where we operate
18 Stakeholder engagement
21 Our investment proposition
23 Capital allocation framework
25 Key performance indicators
26 Operating and financial review
34 Corporate social responsibility
41 Risk management
Governance
52 Chairman’s statement
54 Board of Directors
56 Corporate Governance Report
74 Directors’ Report on Remuneration
96 Directors’ Report
Financial statements
102 Independent auditor’s report to the members of Inchcape plc
112 Consolidated income statement
113 Consolidated statement of comprehensive income
114 Consolidated statement of financial position
115 Consolidated statement of changes in equity
116 Consolidated statement of cash flows
117 Accounting policies
127 Notes to the financial statements
176 Alternative performance measures
178 Five year record
179 Company statement of financial position
180 Company statement of changes in equity
181 Company accounting policies
184 Notes to the Company financial statements
Other information
197 Shareholder information
Highlights
Revenue
£6.8bn
2019: £9.4bn
Free cash flow1
£177m
2019: £213m
Return on capital employed1
12%
2019: 22%
Dividend per share1
6.9p
2019: 8.9p
1. APM (alternative performance measure), see page 176-177
VISIT OUR WEBSITE FOR ADDITIONAL INFORMATION
AND INTERACTIVE FEATURES INCHCAPE.COM
Cover image: Andrei Ionut-Alin, Technician from our Toyota
and Lexus retail and service centre in Voluntari, Romania
Clarifying our financial metrics
The following table shows the key profit measures that we use throughout this report to most accurately describe operating
performance and how they relate to statutory measures.
Metric
Gross Profit
£m
Use of metric
877.8 Direct profit contribution from Value Drivers
(e.g. Vehicles and Aftersales)
Add back: exceptional items charged to
gross profit
Gross Profit (pre exceptional items)1
Less: segment operating expenses
Operating Profit (pre-exceptional items)1
Less: exceptional items
Operating Loss
Less: Net Finance Costs and JV profit
Loss before tax
Add back: exceptional items
Profit before tax and exceptional items1
11.6
889.4
(723.9)
165.5
(257.1)
(91.6)
(36.6)
(128.2)
257.1
128.9
1. APM (alternative performance measure), see page 176-177
Profit generated by the Group
Statutory measure of Operating Profit
Statutory measure of profit after the costs of financing the Group
Bringing mobility to the world’s
communities – for today,
for tomorrow and for the better.
As an independent, multi-brand automotive
distributor and retailer, we bring the best loved
brands to customers throughout the world.
This is brought to life by our talented people through
a combination of long-standing partner relationships,
a growing global footprint, a unique business model
and a long-term strategy.
Inchcape Annual Report and Accounts 2020
1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Chairman’s welcome
Prioritising safety, managing risk and
continuing to serve in a challenging year
Nigel Stein
Chairman
Shareholders were also impacted by the
withdrawal of the recommended dividend
payable in June 2020 and cancellation of
the £150m share buyback programme then
underway as precautionary moves to protect
the Group’s liquidity.
By the end of June, as the first wave subsided,
the Group quickly established a ‘new normal’
way of operating, with no further utilisation of
government support schemes. Staff temporarily
laid off due to their business being closed were
from then on entirely at Inchcape’s cost. And
where lower levels of demand unfortunately
made it necessary, a number of permanent
headcount reductions were made. The
precautionary £100m drawn down under the
CCFF scheme was repaid; other suspended
activities resumed with Executive Directors’ and
management salaries reverting to former levels.
Strategic progress
In spite of the pandemic, the Group took
some important steps forward with its strategy.
This included the acquisition of the Daimler
Distribution businesses in Colombia and El
Salvador which help build our relationship with
that important OEM. We also added to our MINI
and Jaguar Land Rover distributorships as well as
selling a number of dealerships in the UK as part
of building a better, stronger UK business.
As announced last May, Duncan Tait took over
as CEO in July 2020, bringing considerable
experience of the Technology sector, which is
of increasing importance to Inchcape’s future.
His report, which follows this, gives more details
of our strategic evolution.
The Board keeps a close eye on the major
disruptive trends affecting the global automotive
industry and has considered what impact the
pandemic may have on them. Shared ownership,
autonomous vehicles and fully connected cars
still lie some way ahead, but electrification of
the drivetrain has accelerated. The pace of
electrification is still significantly driven by
government legislation, incentives and support
for investment in the necessary charging
infrastructure. Many countries are now bringing
forward their target dates for achieving the
milestones on the path to zero emissions as
a direct response to climate change and
recent changes in US government policy will
undoubtedly provide a further boost towards
electrification globally.
Dear Shareholders and all of our stakeholders,
When writing last year, I referred to the impact coronavirus
was having on our business in Asia. Its subsequent evolution
into a global pandemic dramatically increased that impact
with most of Inchcape’s businesses around the world
experiencing periods of compulsory shutdown and
restricted operations. The prompt actions taken across the
Group, prioritising the safety of employees and customers,
maintaining high levels of customer service, reducing costs
and maximising cash flow, proved very successful in taking
us through the crisis and are a tribute to the hard work of the
whole Inchcape team. I congratulate them and thank them
greatly for their enormous efforts in 2020.
Performance
Against the background of sharply reduced
automotive markets, the Group’s financial
performance for the year was very satisfactory,
with profit before tax (before exceptionals)1 of
£129m and free cash flow1 of £177m. Almost all of
this came from the performance in the second
half of the year, once the initial shockwave of
COVID-19 had subsided. During the early, highly
uncertain period, when many operations were
completely closed, the Group took short-term
protective actions to reduce costs and secure
liquidity, including utilising to a degree various
government sponsored furlough schemes in the
UK, Australia and Singapore and securing a
temporary borrowing facility under the UK CCFF
programme. The Board of Directors and senior
management all agreed to a voluntary 20%
reduction in their fees or salaries.
1. APM (alternative performance measure), see page 176-177.
2
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Inchcape Annual Report and Accounts 2020
Inchcape is confident that our partnership with
advanced technology OEMs puts us in a good
position to both respond to and take advantage
of the accelerating pace of electrification. We
continue to watch developments closely and
shape our strategy accordingly.
Board
As mentioned above, we were delighted to
appoint Duncan Tait as our new CEO from
1 July 2020 succeeding Stefan Bomhard, who
left Inchcape to take up a position elsewhere.
Alex Jensen was appointed in January 2020 as
stated in last year’s Annual Report and Rachel
Empey recently announced her intention to stand
down in April 2021 due to other commitments.
Rachel has made a strong contribution to our
Board over the last five years for which we thank
her. We have commenced a process to seek a
suitable replacement.
Till Vestring has completed nine years on the
Board and ordinarily would stand down at the
forthcoming AGM. We highly value having a
Board member based in Asia, our largest
market, and are actively seeking an Asia-based
replacement. With the current COVID travel
restrictions, Till has kindly agreed to extend his
tenure until we have successfully appointed
and inducted his replacement onto the Board.
The various unexpected activities of 2020 made
for a busy year for the Board. I would like to
express my gratitude to all my fellow Board
members for their commitment and support
over the last 12 months.
Dividends and returns to shareholders
The Board decided as a precautionary measure
not to pay dividends during 2020 and to cancel
the share buyback programme already
underway. The subsequent financial performance
and in particular the excellent work on liquidity
led by our CFO, Gijsbert de Zoeten, have left our
already strong balance sheet in an even better
position. Having carefully considered the situation
from a range of stakeholder perspectives, the
Board has decided on this occasion to
recommend a dividend of 6.9 pence per
share payable in June 2021 (2020 £Nil).
Looking ahead
At the time of writing, it seems likely that COVID-19
will be with us for some considerable time longer,
with all that implies. But we remain highly
confident in the Group’s ability to maintain its
strong operating capability through the months
ahead, whilst also maintaining focus on our
strategic progress.
S172 statement
The Directors have exercised their duties under the Companies
Act 2006 throughout the year, including under Section 172, the
duty to promote the success of the Company whilst having
regard for the factors in 172(1)(a) to (f). These and other
factors are taken into consideration by the Directors when
making decisions in their role as the Board of Inchcape plc.
The factors listed under S172 are integral to most of the
significant decisions taken during the year. The Board is satisfied
that the information provided by management and others via
reporting, performance updates, key performance measures,
independent advice and industry and economic updates is of
appropriate quality to allow the Board to have due regard for
each of the factors.
Case studies demonstrating how the Directors have discharged
their duties under S172 are given on page 60. Stakeholder
engagement is given on pages 18 to 19. Additional information on
areas which impact stakeholders can be found on:
S172 factor
Consequences of
decisions in the
long term
Interest of Company’s
employees
Foster Company’s
business relationships
with suppliers,
customers and others
Impact of operations
on community and
the environment
High standards of
business conduct
Acting fairly between
members
Additional information
Strategy
Capital allocation
Risk
Stakeholder engagement
CSR Report
Directors’ Report
Stakeholder engagement
Strategic Report
Business model and
value chain
Stakeholder engagement
CSR Report
Non-financial information
statement
Non-financial information
statement
Directors’ Report
Page
8-9
23
41-50
18-19
34-36
98-99
18-19
10-11
12-19
18-19
37
38-39
38-39
96
I would end by again thanking the whole
Inchcape team across the 34 countries in which
we operate for their extraordinary efforts in this
extremely difficult year. You should be extremely
proud of what you accomplished. Thank you!
Nigel Stein
Chairman
Inchcape Annual Report and Accounts 2020
3
3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Chief Executive’s review
An outstanding business with an exciting
future ahead
Duncan Tait
Group Chief
Executive
I am delighted to present my first review since
succeeding to the Group CEO role in July 2020.
My tenure began in the midst of the global
COVID-19 pandemic, a time of significant
challenge for the Group, our industry and the
world at large, but I am pleased to confirm
that I inherited a strong and sustainable business.
This is reflected in our full-year results which,
despite dynamic market conditions, were ahead
of our recently revised expectations.
Before reviewing our performance in 2020 and setting out my
thinking for the future direction of the business, I want to first
pay tribute to my colleagues. Our performance in extremely
testing times is down to their dedication and efforts. I could not
be prouder to work with such talented people, who ensured
that the business navigated the complexities of the global
pandemic. As well as looking after our business, colleagues
have delivered for their local communities, contributing crisis
support by offering expertise and deploying resources at the
peak of the pandemic.
The characteristics that attracted me to join Inchcape earlier
in the year have only been reinforced by what I have seen.
Our underlying strength is borne of a combination of factors
including the diversity of our global markets, long-standing
partnerships with many of the world’s leading automotive
manufacturers, unique business model, investment proposition
and diverse and talented people.
These factors have enabled the business to deliver what I think
is an outstanding result despite the challenges we faced. If we
can perform like this under such challenging circumstances,
we should be excited about what we can do in a more
stable environment.
Performance
Clearly, the COVID-19 pandemic had a material impact on
trading for a substantial period of the year, as markets
experienced government mandated lockdowns. Despite the
initial disruption however, we saw an improving trend towards
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4
Inchcape Annual Report and Accounts 2020
the end of the second quarter when some markets were able
to partially reopen. The dynamism of the situation meant there
was a balance of exposure to restrictions: whereas several of
our operations in Latin America, for example, saw the most
severe lockdowns, markets in Europe were able to remain
partially open for servicing, and Hong Kong remained open
and trading throughout the period.
From the beginning of the pandemic, we had a dedicated
‘taskforce’ to manage the risks we faced and report on our
response. Business continuity measures were introduced
and robust health and safety protocols put in place to
ensure the protection of our customers and our people.
Social distancing measures and PPE provision have helped
to minimise the risk of exposure.
The situation was dynamic throughout 2020, and has
continued to cause some disruption at the start of 2021 but
I believe we are well prepared both from operational and
liquidity standpoints.
I am delighted with the way in which our teams worked to find
solutions to maintain a route to market for our OEMs, adapting
practices to enable us to continue to serve our customers
notably through accelerating rollout of ’click and collect’,
online and omni-channel services.
Revenues of £6.8bn for the year compare to £9.4bn in 2019,
while we delivered profit before tax and exceptional items of
£129m (vs £326m in 2019), the majority of which was generated
in the second half. Cash management was exceptional
throughout the year, but particularly shone through in the
second half, clearly demonstrating the highly cash-generative
nature of our business model.
The headline numbers mask the significant progress the Group
made in 2020 including the successful execution of the largest
cost-saving programme in our history, and a further
rationalising of our retail footprint through selective divestment.
While 2020 will always be associated with COVID-19, a number
of our markets were also significantly impacted by social unrest.
For those within Inchcape it will be remembered as a year our
business showcased its resilience, and took prompt, but tough,
actions to make our platform leaner and fit for Distribution-
focused growth.
Business development
I am pleased to report that, despite the considerable
challenges presented by the pandemic, the Group continued
to make good strategic progress on several fronts: expanding
our portfolio representation for key OEM partners; rationalising
our retail footprint in non-Distribution markets; further
implementing new digital capability; and introducing business
optimisation processes in sales and operations planning.
We expanded our representation of Daimler in the Americas
during the year, completing the acquisition of Daimler
Colombia and becoming, within the space of a few months,
the second largest Daimler distributor in Latin America.
This important build to the Daimler platform was then further
enhanced with the addition of the contract for El Salvador later
in the year. Towards the end of 2020, we also secured the
distribution rights for MINI in Chile and both MINI and BMW
Motorrad in Peru which we began operating in December.
Central and South America has been the key focus for our
growth strategy and since 2016 we have progressed from
representing one brand in two markets to our position at the
end of 2020 in nine markets and a strong portfolio of premium,
volume, commercial and electric vehicle (EV) focused brands.
We have also developed our position in Europe, agreeing a
Distribution joint venture with Jaguar Land Rover in Poland, one
of the largest available markets in the region. This consolidates
our representation of the brand across territories in northern
Europe, including all three Baltic states, and brings Poland into
the Distribution segment where previously we had a Retail-only
position in the market.
I am pleased to report that several key initiatives have seen
significant developments over the year, particularly as we seek
to build the most efficient and cost-effective Distribution
platform for our automotive partners, one that will respond to
the changing priorities of consumers and the challenges and
opportunities presented by climate change.
Our focus is on optimising our business, creating an
environment in which data-driven decision-making streamlines
our processes and empowers our people by reducing
laborious administrative tasks. Automating processes in Sales
and Operations Planning (S&OP) enables more accurate stock
forecasting so that we can manage our inventory much more
efficiently. This is a model which combines faster, digitalised
processes with human experience and expertise to create
optimal stock levels and therefore also positively affecting
working capital management, inventory obsolescence, storage
costs and supporting gross margins.
Similarly, our Customer Lifecycle Management (CLM)
programme combines the skills and capabilities of our people
with integrated digital support platforms to provide our
customers with an improved experience. With customer
interactions increasingly taking place online further into the
purchase process (even as far as ‘click and collect’), our
omni-channel platform allows customers to build the vehicle
access experience that they want. Having initiated the
programme in Melbourne, Australia, in the past year we have
begun rolling out to our operations in South America, with
staggered implementation planned in other markets.
Strategic priorities
The Ignite strategy has laid strong foundations for the Group
and catalysed a shift towards the more attractive Distribution
segment. As we embark on the next phase of the Group’s
journey, Distribution remains at the core of the business. In
setting the future direction we have reflected on the structural
changes taking place across the automotive industry, and how
these provide opportunity across our core competencies as a
distributor of mobility services in fast-growing markets.
We concluded that an ambitious Inchcape could benefit
significantly from and thrive in this new world, one where we
can both leverage our existing Distribution infrastructure and
drive expansion across new markets and competencies.
Our new strategy will focus on two key growth pillars:
1. Distribution Excellence; and
2. Vehicle Lifecycle Services
In ‘Distribution Excellence’ we see an opportunity to take our
core Distribution business, and make it both better and bigger.
In ‘Vehicle Lifecycle Services’ we believe there is significant
untapped potential, across all of our markets, that the
business has not fully realised in the past. In summary, we are
putting more emphasis on capturing the lifetime value of both
customers and vehicles. We will approach our growth in a
prudent and structured manner, in close collaboration with
our OEM partners.
We have identified three key enablers that will play an integral
role in making our strategy a success:
– People, Culture and Capabilities: attracting, developing
and retaining talent to enable a high performance
innovation culture
– Digital, Data and Analytics: integrate data and analytics
to drive decision-making, and digitalise customer journeys
– Efficient Scale Operations: standardisation of processes
regionally and globally
We are confident this will drive growth within our current
footprint and even faster expansion in new markets, with
both existing and new partners.
As we look to define the future strategic direction of the
business, so we have reviewed the role Inchcape plays in
society and in this light we have defined our purpose:
“Bringing mobility to the world’s communities – for today,
for tomorrow and for the better”
In conjunction with the development of our mid-term plan,
we are building a responsible business plan that is deeply
connected to our strategy and to all of our stakeholders.
Inchcape is a strong business, with significant unrealised
potential. With our strategy we are striving to create an
excellent business, with meaningful growth opportunities to
deliver shareholder value through organic growth,
consolidation and cash returns.
READ MORE ABOUT OUR EVOLVING STRATEGY AND NEW PURPOSE ON PAGES 8-9
Our people
I would like to underscore how impressed I have been by our
people, and to thank them for their dedication during a very
challenging year. Our better than expected performance is
credit in no small part to our people’s spirit and can-do attitude.
Inchcape employs a diverse talent pool that will be a major
asset in the context of our evolving strategy. This is a business
that strongly believes in supporting people to grow in their
careers, just as they contribute to the growth of the business.
This approach will continue to drive how we attract, develop
and retain talented individuals as we look to support the further
development and implementation of the strategy.
Sector reclassification
Given the shift of the business towards Distribution, the
London Stock Exchange reconsidered the appropriateness
of Inchcape’s sector classification. As of 19 June 2020,
the Group has been classified within ’Business Support Services’
(previously ’Speciality Retail’).
Inchcape Annual Report and Accounts 2020
5
5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Chief Executive’s review continued
Capital allocation
Our capital allocation policy remains unchanged and, in
order, our priorities are: to invest in the business to position it
strongly for the future; to make dividend payments; to conduct
value-accretive M&A; and, in the absence of appropriate
inorganic opportunities, consider share buyback programmes.
With a considerably strengthened financial position and
renewed confidence in the future, the Board, having taken
into account the extraordinary circumstances that the business
endured during the year and a broad stakeholder perspective,
believes it is the right time to resume dividends and has
proposed a payment of 6.9p for FY2020.
Investment proposition
Distribution is at the core of Inchcape. Given our geographic
footprint, with exposure to high growth markets and our
diversified revenue streams, the Group aims to deliver
global GDP-plus organic growth. The highly fragmented
nature of Distribution also provides significant scope for
inorganic expansion.
As the largest independent automotive distributor, we have
a unique opportunity to leverage our scale and efficiencies,
which we are doing today with our digital developments. In
addition to its attractive growth prospects, the business is
asset-light with a history of delivering a strong cash-conversion.
Combined with a disciplined approach to capital allocation,
we believe these should enable the Group to maintain its long
track record of delivering attractive shareholder value.
Looking ahead
We are excited to be entering the next phase of the Group’s
Distribution focused growth strategy, with an emphasis on
greater use of technology to improve our business for the
benefit of our consumers, our OEMs and our people.
As of today, the COVID-19 situation remains dynamic. While
we saw good momentum in the business in the second half,
volatility and unpredictability are likely to continue throughout
2021. Our operations are better equipped to continue in this
rapidly changing environment and we have materially
reduced our cost base. Absent any severe restrictions in
2021, we expect material growth in profits and an improved
operating margin. This takes account of a c.£15m translational
currency headwind to Group profits based on prevailing rates.
Looking beyond the short term, our vision is to both strengthen
and further broaden our OEM relationships and to continue to
expand our geographic reach – enabling us to bring mobility
to the world’s communities.
Our Group Executive
Committee
The Executive leadership is a global team of
business leaders that combines a strong focus on
operational excellence with a wealth of
experience in automotive and a wide range of
other industries, including FMCG, management
services, utilities and finance. The Executive Team
drives the strategic vision and operational
direction of the Company on behalf of the Board.
Duncan Tait
Group Chief Executive
Gijsbert de Zoeten
Chief Financial Officer
George Ashford
CEO APAC
Mike Bowers
Group General Counsel
James Brearley
CEO UK
Helen Cunningham
Chief Human Resources
Officer
Duncan Tait
Group Chief Executive
Ruslan Kinebas
CEO Americas & Africa
Mark Dearnley
Chief Digital Officer
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Inchcape Annual Report and Accounts 2020
Glafkos Persianis
CEO Europe
During 2020 we welcomed four new Executive Officers to Inchcape, in addition to the appointment of
our new Group CEO. This change has been driven by several factors including the reorganisation of
our operational regions and the acceleration of our focus on digitalising the systems and processes
that support the business.
Glafkos Persianis
CEO Europe
Helen
Cunningham
Chief HR Officer
Glafkos joined Inchcape in April 2020 from Vodafone Group
plc, where he most recently held the post of Commercial
Director for the UK and was responsible for 9,000 colleagues
and a turnover of €3.3bn.
Q: What is Inchcape doing to improve its use of analytics and
how will this enable the business to maximise value in the
customer and vehicle lifecycles?
A: Improving our data analytics capability at Inchcape will help
drive better decision-making across our organisation, with the
aim of improving our overall customer satisfaction, revenue
and profitability. We’re doing this through a pragmatic ‘test
and learn’ approach where we apply advanced analytics and
data science to specific ‘use cases’, which are prioritised
based on the value they can bring to our markets and their
ease of execution. Once deployed, use cases can easily be
adapted and transferred across to other markets. Advanced
analytics use cases touch all the steps of a customer’s vehicle
ownership lifecycle: driving more customer traffic to our web
sites; better converting this website traffic into leads and sales;
and improving the retention and value of our customers in
aftersales and potential to purchase again. To enable this,
we are establishing a global cloud-based advanced analytics
and data management platform. And we are building central
capability in data strategy, architecture, engineering and
governance which is supported by local in-market resources for
analytics deployment and operation.
Mark Dearnley
Chief Digital
Officer
Formerly of Bain & Co, HMRC and the telecomms companies
Vodafone Group plc and Cable & Wireless plc, Mark joined
Inchcape in September 2020 to lead Inchcape’s data and
digital transformation.
Q: The business has signalled the importance of accelerating
its digital capability – can you summarise what this means to
Inchcape in practice?
A: Our customers expect a fully omni-channel experience from
Inchcape and our retail partners. We are focused on
developing and continually optimising the digital platforms
that support customers, and making internal processes as
efficient as possible. Advanced analytics are increasingly
used to improve the customer experience and business
performance, and cyber protections ensure everything
remains safe.
This agenda means we can offer fantastic digital, analytics,
technology and cyber careers in Inchcape. I’m passionate
about developing our talent across the world, and really excited
to have joined Inchcape to be part of this digitised future!
Having held executive HR and operational roles in multiple
sectors, Helen joined Inchcape in 2016, initially in the UK and
subsequently in the high-growth potential and M&A focused
Emerging Markets and Americas & Africa regions before being
appointed to the Executive team in October 2020.
Q: How will the refreshed strategy support Inchcape’s
continuing inorganic growth agenda, something with
which you have been heavily involved in recent years?
A: The strategy refresh we are undertaking will underscore
our commitment to developing a differentiated and
market-leading Distribution business. Underpinning this will
be world-class solutions in omni-channel customer experience
and operational practice enabled by highly capable people.
With this capability and by improving the economics of
Distribution, we’ll have the ability to win more business with
both current and new OEM partners, and to buy more
Distribution rights from competitors. Ultimately, we will be
able to increase the size of our addressable market and the
share of that market. Crucial to our long-term growth will be
integrating acquired talent and attracting new talent to further
enhance our capabilities, becoming a respected employer of
choice in all our markets.
Mike Bowers
Group General
Counsel
Mike joined Inchcape in 2015 as Group General Counsel,
with responsibility for company secretarial, regulatory and
compliance and the delivery of legal services across the
Group. He is a UK qualified solicitor and legal professional with
significant prior experience of in-house corporate legal roles.
Q: Inchcape is addressing its responsibility to society in a
newly defined purpose. What lies behind this and how does
responsible business enhance your investment proposition?
A: It is no longer enough for corporates to consider only the
narrow, short-term interests of their shareholders; they need to
think about those things that are important to each of their
stakeholders including the communities of which they are a
part. Society, through government, is increasingly asking
corporates to act in ways that are responsible, and
demonstrably sustainable, and to show how they are taking
these matters into account in their strategy and their operating
model. Our newly created purpose lays down a marker for the
Company that we want to be in the future, provides a guiding
light for our teams and will help our stakeholders better
understand who we are: ‘bringing mobility to the world’s
communities – for today, for tomorrow and for the better’.
Inchcape Annual Report and Accounts 2020
7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Our strategy
Accelerating and evolving our business
Over the past five years, we have pursued a successful growth strategy under Ignite, one
which has seen the Group grow from 26 to 34 markets and add new OEM partners to its
Distribution portfolio. Our opportunity moving forward is to make our operating model
genuinely scalable. Scalable in our core business of automotive Distribution. Scalable to
capture more of the vehicle lifecycle.
Our growth opportunities
1. Generating more value from existing markets
and customers by transforming our route to
market and operational efficiency
New vehicle import
Customer
acquisition
Customer
retention
2. Developing products and services to capture
new sources of value throughout the vehicle
and customer lifetime
New vehicle import
1st sale
2nd sale
3rd sale
Finance &
Insurance
Aftersales
Trade-in
3. Growing in new markets and with new partners
by demonstrating the value we bring to OEMs
In that time, we have developed new ways of reaching our
customers and for them to access our services, via on- and
offline channels and in combinations of both. We have initiated
collaborations with key partners and moved quickly into testing
how we can participate in new areas of private, shared and
public mobility. We have developed playbooks of best practice
to begin establishing a ’one Inchcape’ way of doing things,
from integrating acquisitions to implementing back-end
platforms for our support functions. And we have participated
in the consolidation of our industry through selective value-
accretive M&A in both new and established markets with both
new and established partners.
The successes we have seen with this strategy have come from
a pursuit of growth and forward momentum. Now, with much
of this growth-driving activity firmly embedded in the business,
we are reviewing and refreshing our strategy to prepare for the
next stage of our journey.
We start this journey in a good place with strong foundations
in place to support our future goals. Our new strategic priorities
will be delivered through a scalable, standardised and digital
operating model driven by centres of excellence, while
retaining our proximity to market. By embracing a one
Inchcape way of working, and by building on our strong
foundations through technological and data-led solutions, we
have the opportunity to transform Inchcape into a business
that is ready to maximise the opportunities in front of us now
and to underpin our long-term sustainability.
Change is driving opportunity
Our world, our industry and our business are experiencing
unprecedented change. This change represents an imperative
in our existing markets, but also a once-in-a-generation
opportunity for Inchcape to grow. This growth will come from
three opportunities:
1. Generating more value from existing markets and
customers through route to market transformation
Success in providing OEMs with an omni-channel route to
market will mean we sell more goods and services to
consumers while reducing the cost of taking a car to market
for our partners.
2. Expanding into new and adjacent areas, capturing more
value from our vehicles as well as others
Adjacent markets like Used cars and parts are being disrupted.
This provides opportunities for Inchcape to create new solutions
or take proven solutions from other markets to capture a
greater part of the vehicle value chain.
3. Using our core capabilities and market presence to expand
and grow in new markets and with new partners
Manufacturers are now looking for partners in the markets they
choose not to serve themselves, who have the scale to be able
to exploit technology and data to deliver the omni-channel
solution consumers are demanding.
8
8
Inchcape Annual Report and Accounts 2020
We must accelerate and evolve.
To realise these opportunities, we have identified two strategic
priorities, supported by three enabling actions.
We have clarified our purpose
Inchcape has a long and successful history of international
trade based on a pioneering approach and spirit of innovation.
Priority #1: Transform our core business through Distribution
Excellence
The urgent need to change our route to market model is well
understood and already underway. We need to accelerate the
speed and scale of our ambition to ensure we offer our OEM
partners the omni-channel solution that serves the customer
more effectively than they or a competitor can. The only way
to do this is through a step-change in our digital capabilities,
use of data and through the standardisation and relentless
optimisation of our core processes.
This will provide the opportunity to expand our market presence
and broaden our OEM partnerships.
Priority #2: Expand into new and adjacent Vehicle Lifecycle
Services
The rise of digital business models in adjacent areas presents
an opportunity for Inchcape to capture elements of the vehicle
value chain currently under-exploited or not addressed.
Digitalisation is removing barriers to entry and enabling
competitors to create and scale businesses quickly. Inchcape’s
local market knowledge, access to digital capability and
exposure to proven disruptive models in existing markets means
that Inchcape has the right to play in these adjacencies,
creating new revenue streams.
Enabler #1: Develop the People, Culture, and Capabilities we
need to build on our core strengths of executional excellence
and automotive knowledge and blend these with the digital,
technological and process capabilities needed to succeed in
the future.
Enabler #2: Use Digital, Data and Analytics to create the
consumer experience relevant to each market based on data
driven insights; make the business critical decisions that support
efficient and effective execution using data; and ensure all of
this data is totally secure.
Enabler #3: Develop Efficient Scale Operations to standardise
our back office and core processes and apply ‘one best way’
to make us more efficient and more successful.
Our strategy
Focus on two priorities to realise these opportunities
Distribution
Excellence
Vehicle Lifecycle
Services
As a trading company, we have a strong track-record of
successful expansion – developing new businesses in
markets we know well and entering new geographies
with familiar businesses.
Combined with considerable local freedom to innovate and
pursue opportunities, these traits have grown Inchcape from its
origins as a merchant trading company over two centuries ago
to the international automotive services group we are today.
While the goods and services Inchcape provides have
changed, our purpose retains this same pioneering spirit and
ambitious global outlook:
Bringing mobility to the world’s communities
– for today, for tomorrow and for the better
Our purpose in more detail
Inchcape brings the mobility solutions provided by our
automotive partners by providing the routes to market and
access to customers through our Distribution and Retail expertise.
We enable access to a broad range of vehicles from
passenger vehicles and motorbikes through to heavy trucks,
commercial and municipal transport and we facilitate their
continued use through Aftersales services. These products and
services will evolve over time but our role and motivation to
improve mobility for the customers and communities we work
with will remain unchanged.
The brands we represent, the markets in which we operate and
the customers we serve have unique characteristics. Borne of
our heritage of trading throughout the world and embracing
global diversity, Inchcape’s ability to identify, understand and
service the needs of our communities is one of our key strengths.
Our viability as an organisation is founded on how we perform
today and how we embrace change and adapt to ensure our
continued performance in the future. Inchcape has a rich
history of surviving and thriving in our past; we aim to push into
tomorrow with a continual focus on excellence and innovation.
For better has three meanings for Inchcape: capturing our
pursuit of continuous improvement; reflecting our aspiration to
be the trusted partner to OEMs; and outlining an ambition to
achieve our goals while acting responsibly and sustainably for
the benefit of all our stakeholders.
People, Culture and Capabilities
Digital, Data and Analytics
Efficient Scale Operations
Inchcape Annual Report and Accounts 2020
9
9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Our business model: OEM partnerships
Long-standing partner relationships
Inchcape has long-standing partnerships with the world’s leading automotive
groups, with a core focus on manufacturers of premium and volume passenger
vehicles. In select markets we also represent commercial and agricultural
vehicles and machinery as well as emergent passenger vehicle brands.
Seven core partnerships
We have long-standing relationships with each of our seven core OEM partners,
the majority of which are built around exclusive Distribution contracts in multiple markets.
Toyota
Jaguar Land Rover
Suzuki
Mercedes-Benz
Volkswagen
BMW
Subaru
Passenger vehicle
partners
Commercial
vehicle
partners
10
Inchcape Annual Report and Accounts 2020
53 yrs
50 yrs
43 yrs
33 yrs
32 yrs
31 yrs
28 yrs
Jaguar Land Rover
Toyota
Suzuki
BMW
Subaru
Mercedes-Benz
Volkswagen
The OEMs (original equipment manufacturers) with which Inchcape
partners are some of the foremost drivers of technological innovation in
the automotive industry, from advances in hybrid and battery electric
drivetrains to future mobility solutions.
53 yrs
50 yrs
43 yrs
33 yrs
32 yrs
31 yrs
28 yrs
Inchcape Annual Report and Accounts 2020
11
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Our business model
How we generate value
Our business model is unique in our industry, with our distinct routes to market and
global footprint leveraged across the full Distribution value chain to deliver sustainable
value to our stakeholders and superior returns to our shareholders. In the following
pages, we explore our business model to demonstrate how we bring the best loved
automotive brands to the world.
Our OEM
partnerships
Our routes
to market
Our value
chain
Our global
footprint
Delivering
for our
stakeholders
SEE PAGE 10
SEE PAGE 12
SEE PAGE 13
SEE PAGE 17
SEE PAGE 18
Our routes to market
Inchcape’s organisational strength comes from a combination of parts that forms our business
model: diversified revenue streams, our global portfolio of operations, our value chain, our
stakeholders and how we engage them, our long-standing and deeply embedded brand
partner relationships and our operating strategy.
Distribution 84%
Retail 16%
Operating Profit
Vehicle sales 58%
Aftersales 42%
Gross Profit
Distinct routes to market
The Inchcape value chain spans both
Distribution and Retail competencies,
with a weighting towards higher
margin Distribution contracts.
Diversified revenue streams
We have a balanced approach
to revenue generation, maximising
opportunities at all points
in the value chain.
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Inchcape Annual Report and Accounts 2020
Our business model: where we operate
A growing global footprint
An independent, multi-brand automotive Distributor and Retailer with operations
that span countries on five continents. A balanced and diverse portfolio of both
mature and emerging markets to provide access and in-country expertise for
some of the world’s leading automotive manufacturers.
5
Continents
with active
operations
34
International
markets
90+
Years of
automotive
experience
1,000+
Distribution &
Retail network
locations
15,000
Employees
globally
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
APAC
Europe
Brunei, Hong Kong,
Guam, Macau, Saipan,
Singapore, Thailand
Australia, New Zealand
Belgium, Bulgaria, Estonia,
Finland, Greece, Latvia,
Lithuania, Luxembourg,
North Macedonia, Poland,
Romania, Russia
Americas & Africa
United Kingdom
63 retail centres
Argentina, Chile, Colombia,
Costa Rica, Ecuador,
El Salvador, Panama,
Peru, Uruguay
Djibouti, Ethiopia, Kenya
Inchcape Annual Report and Accounts 2020
17
Our business is segmented in four
regions along geographical lines:
Asia Pacific (APAC)
Americas & Africa
Europe
United Kingdom
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Our business model: our value chain
Full spectrum Distribution
We have a unique and sustainable business
model, providing full-spectrum Distribution
capability for our OEM partners, operating
throughout the value chain.
Acting as custodians of some of the world’s
most recognisable brands, we provide
automotive manufacturers with a highly
effective route to market and a vital link
between the brand and the customer.
2
Brand positioning
With specialist understanding of the
markets in which we operate, we are
ideally placed to develop brand
propositions that will resonate with
local consumers, maximising brand
penetration and market share
positions on behalf of our partners.
Product
planning
Our brand partners
call upon our local
market insights to
inform the planning
and design of new
models, tailoring
designs,
specifications and
sales volumes to
the exacting needs
of each market.
1
3
13
Inchcape Annual Report and Accounts 2020
Import & logistics
Overseeing global transport and operating
comprehensive port or border to showroom
connections means that we are able to remove
all logistical burdens from our partners.
BUY ONLINE
LA
UNCH
BRAND
BRAND NEW CAR
National marketing
We develop and refine marketing plans
on behalf of our partners from pricing and
promotion to customer communications,
based on extensive research of consumers
and competitors as well as our specialist
insight of local market dynamics and
macro-economic trends.
4
BUY ONLINE
BRAND
LA
UNCH
BRAND NEW CAR
5
Parts distribution
With strong brand relationships, specialist Distribution
capabilities and Retail networks, Inchcape is a trusted
supplier of original equipment manufacturer parts
and accessories throughout any given market.
Inchcape Annual Report and Accounts 2020
14
LA
LA
UNCH
UNCH
BRAND
BRAND
BRAND NEW CAR
BRAND NEW CAR
Network management
As an OEM Distribution partner, we choose where
we wish to run Retail stores directly, and where we
select and appoint the independent dealer network,
training and managing them, and optimising the
Retail footprint across each geography.
6
BUY ONLINE
BUY ONLINE
7
New & Used
vehicle sales
We want to provide the
world’s best automotive
purchasing experience
for New and Used
cars throughout the
managed network
and our own Retail
operations. Whether
online or in person our
aim is to make each
stage of the vehicle
ownership journey easy,
effective and enjoyable,
and to build lifetime
relationships with
our customers.
Inchcape Annual Report and Accounts 2020
15
LA
UNCH
BRAND
BRAND NEW CAR
BUY ONLINE
Aftersales and servicing
With long-term investments in state-of-the-art
facilities, expert technicians and first-class customer
care, our objective is to create life-long Inchcape
customers for all their Aftersales needs, from routine
servicing to accident repair.
8
9
Finance & Insurance
We partner with financial institutions
around the world to help our customers
purchase and care for their vehicles with
a wide range of transparent financing
product options available to support
their ownership lifestyle.
Inchcape Annual Report and Accounts 2020
16
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Our stakeholders
Stakeholder engagement
Inchcape’s success is dependent on the continued trust and support of all its
stakeholders; strong relationships that allow us to work with our key stakeholders
are therefore fundamental to the long-term success of the Group.
Stakeholder
Original Equipment
Manufacturers (OEMs)
How we create value
We provide our OEM brand partners with
professional and efficient routes to market
for the post-factory automotive chain
Customers
We provide access to automotive ownership and
support services throughout the customer journey
and aim to deliver the best experiences for
customers in our industry globally
Interests
– Strategy
– Long-term commercial sustainability and
business viability
– Trusted partnerships
– Health and safety
– Responsibility
– Access to vehicle products and services
– World renowned automotive brands
– Specialist product and service knowledge
– Customer service
– Aftersales
– Safe facilities
– Tailored experiences, both on- and offline
– Business viability (for long term contracts)
Employees
We aim to enable every colleague to achieve
their personal goals at each stage of the
employee journey; to recognise and develop
talent; and to foster a socially conscious culture
based on inclusion, empowerment and
optimised potential through learning
– Reward, training and development, diversity
and inclusion
– Strong approach to health and safety – duty of care
– Strategy
– Company purpose
– Long-term commercial sustainability
– Security of employment stemming from business
viability
– Responsible employer
Shareholders
Our objective is to deliver outstanding returns
on long-term investment based on a sustainable
platform for growth, disciplined approach to
capital allocation and cash returns through
dividends and share buyback
– Strategy
– Long-term commercial sustainability and
business viability
– Company purpose
– Capital allocation
– Financial returns and strength of balance sheet
– Investment in responsible business
Communities
We have a balanced approach to engagement
with the communities in which we operate,
empowering ownership at local level with
structural support from Group
– Local employment
– Health and safety, including local environmental
concerns e.g. waste disposal
– Support of local communities
– Responsible approach to local law and regulations
Management
Around 15,000 people employed in 34 countries
Market-specific activity co-ordinated at local level
Strong levels of local community involvement reinforced during pandemic with
Group-level support for extraordinary events affecting
support initiatives. See page 39 for further details
18
Inchcape Annual Report and Accounts 2020
How we engage
Management
Outcomes and progress
New distribution agreement with JLR in Poland, the first such contract for Inchcape
– Regular top to top executive management
in this market
Distribution agreements with Daimler in Colombia and El Salvador, enhancing the
new contracts with the OEM established in the Americas in 2019
Partnerships with Toyota in Singapore and Belgium to offer financial products
to customers
New Distribution contracts for MINI in Chile and for MINI and BMW Motorrad in Peru
– Daily reporting of customer feedback on
Reputation.com:
Customer omni-channel platform rolled out to all Subaru markets in South America
Total reviews in 2020: 35,748
– 89% of reviews positive
– 3% of reviews neutral
– 8% of reviews negative
71% of reviews included customer comments
platform provide two-way communications
better engagement during period of extreme challenge for individuals
– Reviews outcomes of engagement surveys and
Leadership communications framework established to improve top-down visibility
action plans prepared by management
including management townhalls and regular videos from Group CEO
– Regular dialogue with institutional investors
representing approx. 60% of issued share capital
– Total employee experience increased from 59% to 64%
– Overall satisfaction increased from 61% to 70%
– 74% of employees think the Company has acted responsibly
– 85% would recommend working at Inchcape
– An 8% decrease in response rate which may be attributed to number of
employees on furlough
– 23 countries completed roll out of minimum three Risk Management Programmes
– Health, Safety & Environment (HSE) system rolled out in 17 languages
– Measurement of attrition
Colleague communications frequency and content enhanced to drive
‘Together in Spirit’ colleague video campaign emphasising a united
global community
New UK pension scheme introduced, See page 60 for further details
During the year a mixture of virtual and physical meetings were held with shareholders
Votes from shareholders representing 88% of share capital at the 2020 AGM
Upon the announcement of a new CEO, the Chairman contacted shareholders
to discuss the appointment
During his first few weeks with the Group, Duncan Tait met with a number of key
shareholders representing 35% of share capital
meetings
– Market level operational meetings
– Pan-market brand development
Board
– Brand partner deep dive review annually
– Presentations from OEM management at
Strategy Day
Management
reputation.com
– Analysis of Salesforce customer journey
management platform
– Ongoing surveys at market level
Board
– Update on the customer satisfaction analytics from
reputation.com at each meeting
Management
– Management visits to sites
– Pulse survey carried out against backdrop of
COVID-19 and its impact on the business covering:
– Impact on individual and their wellbeing
– Communication
– Leadership and management
– Ways of working
– Performance management framework (DRIVE5)
– Employee intranet and Hive Learning collaborative
capability Group-wide
Board
– UK pension consultation
Management
– Webcasts
Board
– AGM
– Annual Report and plc website
– Capital Markets Day
– Shareholder consultation
– Chairman one to one meetings
our market communities
Board
Updates on community activities included in regional
market updates from CEOs
Stakeholder
How we create value
Original Equipment
Manufacturers (OEMs)
We provide our OEM brand partners with
professional and efficient routes to market
for the post-factory automotive chain
Customers
We provide access to automotive ownership and
support services throughout the customer journey
and aim to deliver the best experiences for
customers in our industry globally
– Long-term commercial sustainability and
Interests
– Strategy
business viability
– Trusted partnerships
– Health and safety
– Responsibility
– Access to vehicle products and services
– World renowned automotive brands
– Specialist product and service knowledge
– Customer service
– Aftersales
– Safe facilities
– Tailored experiences, both on- and offline
– Business viability (for long term contracts)
Employees
We aim to enable every colleague to achieve
their personal goals at each stage of the
employee journey; to recognise and develop
talent; and to foster a socially conscious culture
based on inclusion, empowerment and
optimised potential through learning
– Reward, training and development, diversity
– Strong approach to health and safety – duty of care
and inclusion
– Strategy
– Company purpose
– Long-term commercial sustainability
– Security of employment stemming from business
viability
– Responsible employer
Shareholders
Our objective is to deliver outstanding returns
on long-term investment based on a sustainable
platform for growth, disciplined approach to
capital allocation and cash returns through
dividends and share buyback
– Strategy
– Long-term commercial sustainability and
business viability
– Company purpose
– Capital allocation
– Financial returns and strength of balance sheet
– Investment in responsible business
with the communities in which we operate,
empowering ownership at local level with
structural support from Group
– Health and safety, including local environmental
concerns e.g. waste disposal
– Support of local communities
– Responsible approach to local law and regulations
In order to fully understand the interests of key stakeholders, the Board will engage either directly,
for example a shareholder consultation on the Remuneration Policy, or indirectly, for example by
considering the results of an employee consultation carried out by management.
How we engage
Management
– Regular top to top executive management
meetings
– Market level operational meetings
– Pan-market brand development
Board
– Brand partner deep dive review annually
– Presentations from OEM management at
Strategy Day
Management
– Daily reporting of customer feedback on
reputation.com
– Analysis of Salesforce customer journey
management platform
– Ongoing surveys at market level
Board
– Update on the customer satisfaction analytics from
reputation.com at each meeting
Management
– Management visits to sites
– Pulse survey carried out against backdrop of
COVID-19 and its impact on the business covering:
– Impact on individual and their wellbeing
– Communication
– Leadership and management
– Ways of working
– Performance management framework (DRIVE5)
– Employee intranet and Hive Learning collaborative
platform provide two-way communications
capability Group-wide
Board
– Reviews outcomes of engagement surveys and
action plans prepared by management
– UK pension consultation
Management
– Regular dialogue with institutional investors
– Webcasts
– Annual Report and plc website
– Capital Markets Day
Board
– AGM
– Shareholder consultation
– Chairman one to one meetings
Outcomes and progress
New distribution agreement with JLR in Poland, the first such contract for Inchcape
in this market
Distribution agreements with Daimler in Colombia and El Salvador, enhancing the
new contracts with the OEM established in the Americas in 2019
Partnerships with Toyota in Singapore and Belgium to offer financial products
to customers
New Distribution contracts for MINI in Chile and for MINI and BMW Motorrad in Peru
Customer omni-channel platform rolled out to all Subaru markets in South America
Reputation.com:
Total reviews in 2020: 35,748
– 89% of reviews positive
– 3% of reviews neutral
– 8% of reviews negative
71% of reviews included customer comments
– Total employee experience increased from 59% to 64%
– Overall satisfaction increased from 61% to 70%
– 74% of employees think the Company has acted responsibly
– 85% would recommend working at Inchcape
– An 8% decrease in response rate which may be attributed to number of
employees on furlough
– 23 countries completed roll out of minimum three Risk Management Programmes
– Health, Safety & Environment (HSE) system rolled out in 17 languages
– Measurement of attrition
Colleague communications frequency and content enhanced to drive
better engagement during period of extreme challenge for individuals
‘Together in Spirit’ colleague video campaign emphasising a united
global community
Leadership communications framework established to improve top-down visibility
including management townhalls and regular videos from Group CEO
New UK pension scheme introduced, See page 60 for further details
During the year a mixture of virtual and physical meetings were held with shareholders
representing approx. 60% of issued share capital
Votes from shareholders representing 88% of share capital at the 2020 AGM
Upon the announcement of a new CEO, the Chairman contacted shareholders
to discuss the appointment
During his first few weeks with the Group, Duncan Tait met with a number of key
shareholders representing 35% of share capital
Communities
We have a balanced approach to engagement
– Local employment
Management
Around 15,000 people employed in 34 countries
Market-specific activity co-ordinated at local level
Group-level support for extraordinary events affecting
our market communities
Board
Updates on community activities included in regional
market updates from CEOs
Strong levels of local community involvement reinforced during pandemic with
support initiatives. See page 39 for further details
Inchcape Annual Report and Accounts 2020
19
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Toyota Motor Corporation
Our partnership with Toyota is the longest in our portfolio,
with 53 years of representation as a distributor in
geographies that reach from South East Asia to East Africa
and from Europe to the Americas. Our partnership with TMC
includes all variations of our business model – Distribution
with exclusive Retail, such as in Hong Kong and Singapore;
Distribution with a managed Retail network, such as Greece;
and Retail only, such as our operations in the UK. The
partnership also extends to both passenger and
commercial vehicles, with which segment we have
expanded more recently in South America.
Locations
Distribution
Belgium, Brunei, Bulgaria, Djibouti, Ethiopia,
Greece, Guam, Hong Kong, Luxembourg,
Macau, North Macedonia, Romania, Saipan,
Singapore
Chile & Colombia (Hino only)
Retail
Russia, UK
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Inchcape Annual Report and Accounts 2020
Our investment proposition
Growth and cash returns
Well positioned to deliver shareholder value through organic growth,
consolidation and cash returns.
Disciplined
capital
allocation
Strong cash-
conversion
Leveraging our
distribution
scale
Expansion
opportunities
GDP+ organic
growth
– History of market
outperformance
– Exposure to
high-growth
markets
– 14 distribution deals
since 2016
– Auto-distribution is
highly fragmented
– Global sharing of
best practices
– Roll-out digital
developments
– FCF = 60-70% of
operating profit
– Capex <1% of sales
Past five years:
– Dividends: £420m
– Acquisitions: £600m
– Buybacks: £290m
Strategy
– Growth of existing Distribution markets
expected to exceed global new
car volumes
– Driving innovation and optimising
our processes to create the best
conditions for growth in new markets
Continued consolidation
in a fragmented market
will create value
– Highly fragmented industry
– Inchcape is the largest global
independent distributor
– Inchcape has a 1% share
of the addressable market
of Distribution-led regions
(c.14m TIV, 20% of global total)
and envisages significant
opportunity
Sustainable business model
– Strong, long-term partnerships
with OEMs
– Strong track record of value creation
– Investing for the future and to be
the best
Inchcape Annual Report and Accounts 2020
21
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Subaru Corporation
Inchcape’s Distribution partnership with Subaru is one of the
most important in our portfolio and an example of the close
collaboration between the Group and our brand partners.
We distribute and operate the brand in Australia,
maintaining Subaru’s highest share globally in that market.
Subaru was the OEM brand central to our first significant
expansion in South America in 2016 which has helped to
create a platform for further growth in the region.
Locations
Distribution
Argentina, Australia, Chile, Colombia,
New Zealand, Peru
22
Inchcape Annual Report and Accounts 2020
Capital allocation framework
A strong position to grow the business
Inchcape has a disciplined capital allocation policy. We have a strong balance sheet and
a highly cash generative business model. This results in excess free cash post investment in
organic capex and payment of dividends. We look to utilise this strong position to grow the
business inorganically, investing in value accretive acquisitions that will ensure longer-term
growth of the business and value for shareholders. Beyond this we will look to return any
excess cash to shareholders through share buybacks.
Cash utilisation priorities
Excess cash post
capex, working
capital
Dividend
Value-accretive
M&A opportunities
Remaining excess
FCF distributed
through buybacks
– Strong balance sheet.
– Targeted 60-70% FCF conversion.
Cumulative cash returns to shareholders
Acquisition spend since 2016
2011
£47m
2012
£146m
2013
£222m £50m
2014
£303m
£150m
2015
£394m
£241m
2016
£485m
2017
£587m
2018
£702m
2019
£813m
2020
£813m
£349m
£399m
£399m
£47m
£146m
£271m2
£453m
£635m
£834m
£987m2
£1,102m2
£596.1m
£326.8m
£209.0m
£60.3m
South American acquisition1
Central American acquisition1
Other acquisition1
Total spend
£499m
£1,312m1
1. Including acquired debt
£531m
£1,344m
Dividends (cumulative)
Share buyback (cumulative)
1. In response to COVID-19, the Board cancelled the 2019 final dividend (£70m),
and share buyback programme (£31m complete, £119m remaining).
2. Dividends and share buyback rounded to nearest £m.
Dividend strategy
– Target 40% annual payout ratio of basic adjusted EPS
(pre exceptionals).
– Interim dividend set at 1/3 of the prior year’s total DPS.
Inchcape Annual Report and Accounts 2020
23
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS BMW Group
Our partnership with BMW Group is over 30 years strong and
has been a key focus for consolidated growth, especially in
the Baltic region where we now represent the brand in all
three countries: Estonia, Latvia and Lithuania. In 2020 we
were awarded the Distribution contracts for MINI in Chile
and for MINI and BMW Motorrad (the brand’s motorcycle
division) in Peru, consolidating our position in those markets.
As well as holding Distribution contracts in South America,
we also have significant operations of BMW Group’s brands
in our Retail-only markets: UK, Poland and Russia.
Locations
Distribution
Chile, Estonia, Guam, Kenya, Latvia,
Lithuania, Peru
Retail
Poland, Russia, UK
24
24
Inchcape Annual Report and Accounts 2020
Key performance indicators
Measuring progress
KPIs provide insight into how the Board and Executive Committee monitor the Group’s
strategic and financial performance, as well as directly linking to the key measures for
Executive remuneration. KPIs are stated in actual rates of exchange and pages 176-177
provide definitions of key performance indicators and other alternative performance measures.
Revenue
£6.8bn
2019: £9.4bn
2016
2017
2018
2019
2020
Operating margin2
2.4%
2019: 4.0%
2016
2017
2018
2018
2019
2020
Definition
Why we measure
2020 performance
Consideration receivable
from the sale of goods and
services. It is stated net of
rebates and any discounts,
and excludes sales
related taxes.
Top-line growth is a
key financial measure
of success.
The Group has delivered
£6.8bn, down 19%
organically and down 27%
reported versus prior year.
The decline reflects the
impact of COVID-19, and a
strategic reduction of our
Retail exposure.
Definition
Why we measure
2020 performance
Operating profit (before
exceptional items)
divided by sales.
A key metric of
operational efficiency,
ensuring that we are
leveraging our scale
to translate sales
growth to profit.
Operating margin at
2.4% is 160bps lower than
the operating margin
achieved in 2019,
reflecting the disruption
from COVID-19.
£7.8bn
£9.0bn
£9.3bn
£9.4bn
£6.8bn
4.6%
4.5%
4.2%1
4.3%1
4.0%
2.4%
Profit before tax and exceptional items2
£129m
2019: £326m
2016
£349m
2017
2018
2018
2019
2020
Free cash flow2
£177m
2019: £213m
2016
2017
2018
2018
2019
2020
Return on capital employed2
12%
2019: 22%
2016
2017
2018
2018
2019
2020
£382m
£357m1
£351m1
£326m
£129m
£191m
£314m
£281m1
£279m1
£213m
£177m
30%
30%
28%1
22%1
22%
12%
Definition
Why we measure
2020 performance
Represents the profit made
after operating and interest
expense excluding the
impact of exceptional items
and before tax is charged.
A key driver of
delivering sustainable
and growing earnings
to shareholders.
In 2020 this decreased
61% to £129m, as profits
were weighed down by
the material impact of
COVID-19 on the
Group’s performance.
Definition
Why we measure
2020 performance
Net cash flows from
operating activities, before
exceptional cash flows,
less net capital expenditure
and dividends paid to
non-controlling interests.
A key driver of the
Group’s ability to fund
inorganic growth and
to make distributions
to shareholders.
The Group delivered free
cash flow (FCF) of £177m, a
17% decrease on 2019. FCF
resilience is testament to
the effective management
of our working capital,
and the inherently cash
generative nature of our
business model.
Definition
Why we measure
2020 performance
Operating profit (before
exceptional items) divided by
the average of opening and
closing capital employed,
where capital employed is
defined as net assets add net
debt/less net funds.
ROCE is a measure of
the Group’s ability to
drive better returns for
investors on the
capital we invest.
The Group’s ROCE
dropped to 12%, reflecting
the deterioration of our
profitability.
1. 2018 and 2019 are not comparable with prior years due to adoption of IFRS 16.
2. Alternative performance measure, see pages 176-177.
Inchcape Annual Report and Accounts 2020
25
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Operating and financial review
Resilience evidenced through turbulent times, business well-placed
for the opportunities ahead
Gijsbert de Zoeten
Chief Financial Officer
I am pleased to present the Group’s Operating and
Financial Review for 2020, a year of unprecedented
challenge but one which also demonstrated the
defensive qualities of the business.
We delivered a robust performance in the face of the challenges resulting
from the COVID-19 pandemic. This time last year, nobody could have
predicted the duration or scale of the pandemic, still less the impact it would
have on business activity across all 34 markets where we operate. It is a
testimony to the resilience of our diverse business, and all of our people, that
we finished the year with results ahead of recently upgraded expectations.
Our performance was underpinned by our ability to meet the resilient
demand for both Vehicles and Aftersales services across our markets, in
particular during the second half.
This was supported by our ability to continue
delivering vehicles, provide a click-and-collect
service, and to continue to perform Aftersales
services in affected markets. We also
implemented a cost-restructuring programme,
targeting £90m of overheads reduction which is
now substantially complete. These cost-mitigation
measures have helped not only to support
profitability during the year but created a leaner
and stronger overhead base for 2021.
In spite of the operational challenges, our
absolute focus on cash management contributed
to the strong FCF result. We worked in collaboration
with our OEM partners, managing our inventory
levels and financing terms, and maintained a
heightened level of working capital discipline
across all markets. Supported by our highly cash
generative business model, our overall financial
position has strengthened further, and we closed
the year in a net cash position of £266m.
Against the backdrop of an improving trading
performance and strong cash generation, we
have announced our intention to recommence
dividend payments and the Board has
recommended a final dividend of 6.9p for 2020.
As we enter the next phase of the Group’s
growth strategy, our robust financial position
and disciplined approach to capital allocation
will ensure that the business is well-placed to
leverage the many opportunities that lie ahead.
It is an exciting journey that we are embarking
on and one which will deliver benefits to all
our stakeholders.
Gijsbert de Zoeten
CONTINUES ON PAGE 28
Key performance indicators
Our results are stated at actual rates of exchange. However, to enhance comparability we also present year-on-year changes in
sales and operating profit in constant currency, thereby isolating the impact of translational exchange rate effects. Unless otherwise
stated, changes are expressed in constant currency and figures are stated before exceptional items.
Key financials
Revenue
Operating profit (pre exceptionals)1
Operating margin1
Profit before tax (pre exceptionals)1
Basic EPS (pre exceptionals)1
Dividend per share
Free cash flow1
Statutory financials
Operating (loss) / profit
(Loss) / Profit before tax
Basic EPS
2020
2019
% change
reported
% change
constant FX1
% change
organic2
£6,838m
£166m
2.4%
£129m
23.6p
6.9p
£177m
£9,380m
£373m
4.0%
£326m
59.9p
8.9p
£213m
(27)%
(56)%
(160)bps
(61)%
(61)%
(22)%
(17)%
(19)%
(25)%
(54)%
(150)bps
(59)%
£(92)m
£(128)m
(35.6)p
£449m
£402m
79.0p
1. These measures are alternative performance measures, see pages 176-177.
2. Organic growth is defined as sales growth in operations that have been open for at least a year at constant foreign exchange rates.
26
Inchcape Annual Report and Accounts 2020
Jaguar Land Rover
Inchcape and Jaguar Land Rover’s partnership is one of
very long standing, reaching back around 50 years in total.
We have continued our JLR growth story right up to the
present day, with Distribution contracts awarded for
Thailand in 2016, Colombia and Kenya in 2018, and in 2020
we were awarded our first Distribution contract in Poland
with JLR. We now represent Jaguar and Land Rover as either
a distributor or retailer in 12 markets on three continents.
Locations
Distribution
Colombia, Estonia, Finland, Hong Kong,
Latvia, Lithuania, Kenya, Macau, Poland,
Thailand
Retail
Russia, UK
Inchcape Annual Report and Accounts 2020
27
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Operating and financial review continued
Performance review
2020 was a year with three distinct periods. We
made an encouraging start to the year but our
operations were then materially impacted in
Q2 by COVID-19. While several markets faced
disruption in the second half, overall we observed
an improving trend across our New, Used and
Aftersales revenue streams. The trends we saw
reflected to a certain extent pent-up demand,
but also less stringent lockdown conditions – with
Aftersales allowed to remain open, our ability to
deliver vehicles to customers, and the offer of
click-and-collect services.
Over the course of the year, the Group generated revenue of
£6.8bn, operating profit pre-exceptionals of £166m and free
cash flow of £177m.
Group revenue of £6.8bn was down 27% year-on-year
reported and 25% in constant currency. During the period we
disposed of several retail businesses, which further reduced our
Retail revenue exposure. We completed four Distribution deals,
most notably the acquisition of Daimler’s Distribution business
in Colombia, and the addition of the JLR Distribution contract
in Poland.
On an organic basis revenue declined 19% in 2020, as most
of our markets were weighed down by COVID-19. While the
spread of the virus continued to cause disruption, our organic
performance improved in the second half, falling 9% compared
to the 29% decline in the first half.
The Group delivered an operating profit before exceptional
items of £166m, down 56% year-on-year reported and 54% in
constant currency. The decline reflects the profits lost as
COVID-19 caused disruption to our operations across the
globe. This was evident in the 120bps contraction of Group
gross margins in the first half. In the second half, while our
operations continued to be impacted, albeit to a lesser extent,
gross margins remained stable. As a direct response to
COVID-19, the Group took prompt action to reduce
discretionary costs (e.g. marketing, office, travel), the Board /
senior management took a 20% reduction in fees / salary in
the second quarter and we accessed government support
schemes in the first half in some markets (predominantly the
UK). Subsequently, at the start of the third quarter we
implemented a cost-restructuring programme – targeting £90m
of overheads reduction – which is now substantially complete.
These cost-mitigation measures have helped support
profitability during the year and created a leaner overhead
base for 2021. During the second half, the Board took the
decision not to claim further government support in respect of
the period from July onwards.
Profit before tax and exceptional items of £129m is down 61%
year-on-year reported and 59% in constant currency. The
decline in absolute terms is slightly below that observed at the
operating profit level, owing to a lower (£10m) interest charge
versus the prior year. This is a result of a combination of lower
interest rates and strict inventory discipline, which reduced the
related interest expenses.
28
Inchcape Annual Report and Accounts 2020
During the period we booked exceptional charges of £257m,
largely non-cash and primarily due to the impact of COVID-19.
The majority (£223m) of this relates to goodwill and site
impairments. As a result, the reported loss before tax was
£128m, compared to a profit before tax of £402m in 2019 –
which was supported by gains on disposal of our Retail assets.
In spite of the operational challenges our free cash flow (FCF)
generation remained extremely resilient, with £177m (2019:
£213m) generated over the 12 month period – this represents
a conversion of 107% (57% in 2019), significantly higher than
the long-term average of 60-70%. While operating profit
pre-exceptionals was significantly lower, we mitigated this by
a number of measures resulting in a meaningful improvement
in the Group’s working capital position, a more disciplined
approach to capital expenditure programmes, and reduced
tax and interest payments.
Other notable elements of the cash flow bridge include: net
acquisitions and disposals, which amounted to an inflow of
£40m (acquisition of Daimler Colombia offset by proceeds from
Retail disposals), share buybacks (£31m of the £150m was
completed prior to termination) and the cancellation of the
2019 final dividend in response to COVID-19.
The Group closed the reporting period in a net cash position of
£266m (excluding lease liabilities), which compares to £103m
at the end of December 2019, and £89m as at 30 June 2020.
On an IFRS 16 basis (including lease liabilities), we ended the
period with net debt of £67m (2019: £250m).
Return on capital employed over the period was 12%,
compared to 22% for the equivalent period last year. The
decline was driven by the steep reduction in profits.
Fourth quarter 2020
Group revenue for the fourth quarter was £1.9bn, down 16%
reported. On an organic basis, revenue fell 9%, compared to
a decline of 10% in Q3.
In Distribution, revenue contracted 13%, organically, following a
21% decline in Q3. Topline performance improved sequentially
across most regions, with Asia, Australasia and the Americas all
posting their highest quarterly growth rate since Q1. Revenue in
Europe was held back by further COVID-19 related restrictions in
Belgium, Greece and Romania, while Africa was solid in the
context of a high prior year comparator.
In Retail, revenue contracted 2% organically (Q3: +5%;
supported by the bounce-back) as a second lockdown in
the UK weighed on sales. While the restrictions impacted
performance, the deterioration was less pronounced than we
experienced during the first lockdown, as we were able to
continue delivering vehicles and permitted to perform
Aftersales services.
Distribution
The Distribution segment saw revenue down 21% year-on-year,
with performance significantly impacted by the spread of
COVID-19 from March onwards. While the topline trend
improved in the second half, with fewer and less severe
closures, several markets continued to face disruption. In
addition to our operational improvements, our cost-mitigation
measures supported the overall result, particularly in the
second half, culminating in an operating profit of £140m
(2019: £333m). The operating margin fell 310bps to 3.7%.
2020
£m
2019
£m
% change
reported
% change
constant FX
% change
organic
Revenue
Asia
Australasia
APAC
1,026.6 1,522.5
876.0 1,070.9
1,902.6 2,593.4
1,120.2 1,329.6
Europe
993.5
Americas & Africa
Total Distribution 3,819.9 4,916.5
797.1
168.7
58.0
226.7
41.7
65.0
333.4
Operating profit1
Asia
Australasia
APAC
Europe
Americas & Africa
Total Distribution
Operating margin
Asia
Australasia
APAC
Europe
Americas & Africa
Total Distribution
78.8
1.2
80.0
25.3
34.4
139.7
7.7%
0.1%
4.2%
2.3%
4.3%
3.7%
(33)%
(18)%
(27)%
(16)%
(20)%
(22)%
(53)%
(98)%
(65)%
(39)%
(47)%
(58)%
(32)% (32)%
(17)% (17)%
(26)% (26)%
(17)% (17)%
(13)% (24)%
(21)% (23)%
(53)%
(98)%
(64)%
(40)%
(42)%
(57)%
11.1% (340)bps (340)bps
5.4% (530)bps (530)bps
8.7% (450)bps (450)bps
3.1% (80)bps
(80)bps
6.5% (220)bps (210)bps
6.8% (310)bps (310)bps
1. Operating profit stated pre-exceptionals.
– Asia revenue contracted 32%, and operating profit1 was
down 53%. We expected 2020 would be a challenging year
in Asia prior to COVID-19, forecasting volumes in both
Singapore and Hong Kong would decline 25% and 20%,
respectively. The spread of the virus exacerbated this decline,
weighing on performance in all markets. Singapore endured
a prolonged closure from early April to mid-June (resulting in
the suspension of vehicle licence auctions), and upon
reopening the government announced it would phase
missed licences over a 12 month period – as such the
number of vehicle licences available in 2021 is expected to
exceed 2020. While our operations in Hong Kong remained
open, demand was clearly subdued, albeit we observed an
improving trend in the second half. In spite of the challenges,
we retained our triple crown status (for being the number
one in passenger cars, commercial vehicles and in the
market as a whole) in both Singapore and Hong Kong.
– Australasia revenue contracted 17%, and operating profit1
was down 98%. It was the only region to see a weaker
revenue trend and margin result in the second half
compared to the first half. Having remained open throughout
the first half, COVID-19 related restrictions impacted the
Australian operations in the third quarter. Profitability was
substantially lower as gross margins came under pressure
owing to lower volumes and competitive pressures, but also
unfavourable currency effects. The transactional currency
(AUD:JPY) headwind in the period was c.£15m. The launch of
the new Outback (one of Subaru’s most popular models) in
the first quarter of this year should support the brand’s market
share performance in 2021.
– Europe revenue contracted 17%, and operating profit1 was
down 40%. It was the first of our regions to face widespread
COVID-19 enforced market closures, starting in mid-March
and peaking in April. All impacted markets had reopened
in May, although several markets did face subsequent
restrictions following a second wave of the virus in the fourth
quarter. While the environment was competitive, we gained
market share across a number of markets in the second half.
The launch of the new Toyota Yaris, an extremely popular
model in several of our European markets, should drive
further outperformance in 2021.
– Americas & Africa revenue contracted 13%, and operating
profit1 was down 42%. Geographic diversification meant that
there were some pockets of good performance that helped
offset challenges elsewhere. The Americas was hardest hit in
terms of number of our markets forced to close, as
governments tried to control the spread of the virus. This
weighed heavily during the first half, but as markets began to
reopen we noticed a meaningful improvement. In Africa, our
operations remained open throughout the year with limited
impact from COVID-19 and consequently made a significant
contribution to the segment’s operating profit. All markets
remained open throughout the fourth quarter, and it was the
strongest quarter for the region. Looking ahead, given the
low penetration of vehicles per capita in the Americas &
Africa region, we are optimistic about the growth prospects
over the medium and long term.
Retail
The Retail segment saw revenue down 30% year-on-year,
or down 14% on an organic basis (adjusting for the Retail
disposals over the period). Prolonged shutdowns in both UK
and Russia in the first half weighed heavily on sales, although
demand proved to be more resilient in the second half.
Operating profit1 in the second half was supported by gross
margin improvement and our cost-mitigation measures,
resulting in a profit of £26m for the year compared to £40m
in 2019. The operating margin improved in the second half,
finishing the year flat overall.
2020
£m
2019
£m
% change
reported
% change
constant FX
% change
organic
Revenue
Asia
Australasia
APAC
–
9.4
9.4
159.5
272.0
431.5
UK & Europe
Total Retail
4,031.7
3,008.5
3,017.9 4,463.2
(100)%
(97)%
(98)%
(25)%
(32)%
(100)%
(96)%
(98)%
(15)%
(23)%
(30)% (14)%
Operating profit1
Asia
Australasia
APAC
UK & Europe
Total Retail
–
0.4
0.4
25.4
25.8
Operating margin
8.7
(1.2)
7.5
32.2
39.7
(100)%
nmf2
(94)%
(21)%
(35)%
(100)%
nmf2
(95)%
(15)%
(31)%
Asia
Australasia
APAC
UK & Europe
Total Retail
–
4.3%
4.3%
0.8%
0.9%
5.4%
n/a
nmf2
(0.4%)
nmf2
1.7%
0bps
0.8%
0.9% (0)bps
n/a
nmf2
nmf2
0bps
(0)bps
1. Operating profit stated pre-exceptionals.
2. nmf = not meaningful.
Inchcape Annual Report and Accounts 2020
29
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Operating and financial review continued
– UK & Europe is home to the Group’s remaining Retail
Other financial items
operations in the UK, Russia and Poland. Revenue for the
region was down 23% year-on-year (down 15% on an organic
basis), as closures from late-March weighed on the
performance of both the UK and Russia businesses. We
experienced a step-up in the second half, with solid demand
for New and Used Vehicles, as well as Aftersales services.
During the first half, the UK business received £23m of
government support (employment and business rates),
but was nevertheless still heavily loss-making. We have not
accessed any such support in the second half. Performance
improved in the second half as we experienced higher
Vehicle gross margins and the benefit from our cost-
restructuring efforts. We finished the year with operating
profit1 of £25m (vs £32m in the prior period, which included
profits from businesses disposed in December 2019,
including Inchcape Fleet Solutions), and slightly higher
margins than 2019.
– Asia: the China Retail business (disposed in December
2019) was reclassified from Distribution-Asia to Retail-Asia,
and did not provide any contribution to the region’s
performance in 2020.
– Australasia: the majority of the Retail business in Australia
was sold during 2019. Two additional sites were sold in 2020,
and their contribution until the date of disposal has been
included. The comparative includes these two sites, and the
rest of the Australian Retail business that was sold in 2019.
Following the disposals, there will be no further contribution
to this segment.
Value drivers
We provide disclosure on the value drivers behind our gross
profit (pre-exceptional). This includes:
– Gross profit attributable to Vehicles – New Vehicles, Used
Vehicles and the associated F&I (Finance & Insurance)
income; and
– Gross profit attributable to Aftersales – Service and Parts.
Group
Vehicles
Aftersales
Total Retail
2020
£m
2019
£m
% change
reported
% change in
constant FX
516.9
372.5
889.4
772.3
499.8
1,272.1
(33)%
(25)%
(30)%
(31)%
(23)%
(28)%
Weighed down by the effects of market closures caused by the
spread of COVID-19, over the reporting period we saw a 31%
decrease in Vehicles gross profit, while Aftersales gross profit
was more resilient, decreasing 23%.
We operate across the automotive value chain and during
2020, we generated 42% of gross profit through Aftersales,
compared to 39% in the prior year.
1. Operating profit stated pre-exceptionals.
Government support schemes
The Group has recognised an amount of £30m as a credit
against employee costs and £3m as a credit against other
operating expenses. These have been presented net within
operating costs before exceptional items and the majority
(£23m) was received by the UK Retail business. In some cases
salaries were paid in excess of the amount received under the
government support schemes, and these schemes were utilised
instead of other cost reduction measures that would have
adversely impacted employees (e.g. redundancies). During the
second half of the year, the Board took the decision not to claim
further government support. Due to the nature of the
government support schemes, amounts claimed prior to the
Board decision totalling £11m from governments in Australia and
the UK have been recognised as a liability as at 31 December
2020 as they have not yet been repaid. The Group has also
benefited from the deferral of tax payments due to governments
amounting to £7m as at 31 December 2020.
Exceptional items
Exceptional charges in 2020 amounted to £257m, arising
primarily as a result of COVID-19. Goodwill and site impairments
totalled £223m, with the majority attributable to the Retail
segment and booked in the first half. With the pandemic
continuing to cause disruption in the second half, the
impairment review resulted in a c.£37m write-off of intangible
assets related to our acquisition of Grupo Rudelman (in 2018).
Management remain confident about the attractiveness of the
business in the medium term. In July we announced £70m of
future restructuring costs linked to our cost-restructuring
programme, of which c.£40m has been incurred in 2020, with
the balance falling into 2021. We also incurred a £10m charge
relating to the write down of inventory, and a net cost of £2m
relating to acquisitions and disposals. We benefited from an
£8m gain, primarily relating to the recycling of foreign
exchange gains previously recognised in other comprehensive
income, following the liquidation of a subsidiary. In 2019, the
Group benefited from a £76m exceptional operating gain
which reflected a £109m gain largely relating to the disposal of
our UK fleet and China Retail businesses, offset by some
restructuring costs and asset impairments relating to those
disposals, as well as acquisition costs. Further details in note 3
to the consolidated financial statements on pages 133-134.
Net finance costs
Net finance costs were £37m (2019: £47m). The decrease is
largely due to a reduction in the cost of financing inventory
following the Retail disposals in Australia, the UK and China in
2019, further disposals in 2020 and the overall reduction in
inventory and associated inventory financing in response to the
COVID-19 pandemic. The interest charge is stated on an IFRS 16
basis, and excluding interest relating to leases, our net finance
charge was £23m compared to £28m in 2019. We expect net
financing costs in 2021 will amount to c.£40m.
Tax
The Group’s effective tax rate for the year is 26% before
exceptional items (2019: 23%). The increase compared to the
prior year primarily arose because the Group was not able to
recognise the tax benefit associated with losses in certain
markets. This impact was partially offset by the release of a
provision associated with the European Commission State Aid
issue. We believe an effective tax rate of c.25% is appropriate
for the mid-term.
30
Inchcape Annual Report and Accounts 2020
Non-controlling interests
Profits attributable to our non-controlling interests were £3m
(2019: £6m). The Group’s non-controlling interests comprise 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.
Dividend
The Board recommends a final ordinary dividend of 6.9p
per ordinary share which is subject to the approval of
shareholders at the 2021 Annual General Meeting. In reaching
its decision, the Board has taken into account the extraordinary
circumstances that the business endured during the year and
a broad range of stakeholder perspectives. If approved, the
dividend will be paid on 21 June 2021 to all shareholders on
the register on 14 May 2021.
Cash flow and net debt
The Group generated free cash flow of £177m (2019: £213m)
driven primarily by an improvement in the level of working
capital. After the acquisition of four Distribution businesses, as
well as the proceeds received from our Retail disposals, and
£32m of share buybacks, the Group had net cash excluding
lease liabilities of £266m (2019: £103m). Including lease
liabilities (IFRS 16), our net debt stood at £67m (2019: £250m).
Capital expenditure
During 2020, the Group incurred net capital expenditure of
£41m compared to £54m in 2019. The year-on-year reduction
reflects lower investment in tangible assets in response to the
economic uncertainty following the outbreak of the COVID-19
pandemic partially offset by lower disposal proceeds. Key 2020
projects included investments around our development of an
omni-channel proposition and capacity investments in
Ethiopia. In 2021 we expect net capital expenditure of c.£70m.
Financing
During the year, the Group was confirmed as an eligible issuer
under the UK Government’s COVID Corporate Financing Facility
(CCFF). £100m was issued under this facility in May 2020 and
repaid on 17 July 2020. As at 31 December 2020, the
committed funding facilities of the Group comprised a
syndicated revolving credit facility of £700m (2019: £700m)
and sterling Private Placement loan notes totalling £210m
(2019: £210m). As at 31 December 2020, none of the £700m
syndicated revolving credit facility was drawn (2019: £60m).
Pensions
At the end of 2020, the IAS 19 net post-retirement surplus was
£20m (2019: £10m), with the increase driven largely by a
higher value of plan assets and changes in demographic
assumptions which were partially offset by changes in financial
assumptions. In line with the funding programme agreed with
the Trustees, the Group made additional cash contributions to
the UK pension schemes amounting to £4m (2019: £3m).
Discussions with the Trustees of the Inchcape Motors Pension
Scheme in respect of the actuarial valuation as at 5 April 2019
have been finalised and the Group has agreed to contribute
an additional £3m per annum to the scheme over the next
seven years.
Acquisitions and disposals
During 2020, the Group acquired the Mercedes-Benz
passenger car and private vans distribution operations in
Colombia from Daimler Colombia S.A. The business was
acquired to strengthen the Group’s partnership with Daimler-
Mercedes-Benz in South America. In the second half of 2020,
the Group acquired the Daimler distribution business in El
Salvador, the MINI distribution business in Chile and the MINI
and Motorrad distribution businesses in Peru. The aggregate
cash consideration for these businesses was £32m.
During the year, the Group has continued to optimise its Retail
portfolio and has disposed of 13 retail sites in the UK and two
retail sites in Australia generating aggregate net disposal
proceeds of £64m. The Group has also received £8m of
deferred consideration relating to the disposal of retail
operations in China in 2019.
Reconciliation of free cash flow1
Net cash generated from operating activities
Add back: Payments in respect of exceptional items
Net cash generated from operating activities, before exceptional items
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from disposal of property, plant and equipment
Net capital expenditure
Net payment in relation to leases
Dividends paid to non-controlling interests
Free cash flow
2019
£m
(44.9)
(24.7)
15.7
2020
£m
(27.4)
(20.1)
6.7
2020
£m
254.8
24.3
279.1
(40.8)
(56.7)
(4.3)
177.3
2019
£m
327.2
10.5
337.7
(53.9)
(65.1)
(5.8)
212.9
Included within free cash flow are movements in restricted cash balances described on page 156.
APM (alternative performance measure), see pages 176-177
Inchcape Annual Report and Accounts 2020
31
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Operating and financial review continued
Regional business models
Asia Pacific (APAC)
At the heart of the Asia region, we are the distributor and exclusive retailer for Toyota, Lexus, Hino and Suzuki and operate
Distribution and exclusive Retail for Jaguar Land Rover in Hong Kong with additional Distribution and Retail franchises across the
region. In Australasia we are the distributor for Subaru.
Country
Hong Kong
Macau
Singapore
Brunei
Guam
Saipan
Thailand
Country
Australia
New Zealand
Business model
Distribution & Exclusive Retail
Brands
Toyota, Lexus, Hino, Jaguar, Land Rover, Maxus
Distribution & Exclusive Retail
Distribution & Exclusive Retail
Distribution & Exclusive Retail
Distribution & Exclusive Retail
Distribution & Exclusive Retail
Toyota, Lexus, Hino, Suzuki
Toyota, Lexus
Toyota, Lexus, BMW, Chevrolet
Toyota
Jaguar, Land Rover
Business model
Distribution & Retail
Retail
Distribution
Brands
Subaru, Peugeot, Citroen
VW, Isuzu, Kia, Mitsubishi, Jeep
Subaru
UK & Europe
We have scale Retail operations across the UK focused on premium and luxury brands. Our European operations are centred on
Toyota and Lexus Distribution and Retail in Belgium, Greece and the Balkans, and both Distribution and Retail businesses across
Northern Europe focused on BMW, Jaguar Land Rover and other brands.
Country
UK
Business model
Retail
Distribution & Retail
Brands
Toyota, Lexus, Audi, BMW, MINI, Jaguar, Land Rover, Mercedes-Benz, VW,
Porsche, Smart
Toyota, Lexus
Belgium
Luxembourg
Greece
Romania
Bulgaria
N. Macedonia
Finland
Estonia
Latvia
Lithuania
Poland
Russia
Distribution & Retail
Distribution & Retail
Distribution & Retail
Distribution & Retail
Distribution & Retail
Retail
Jaguar, Land Rover, Mazda
Jaguar, Land Rover, Mazda, BMW, MINI,
BMW, MINI, Ford, Jaguar, Land Rover, Mazda,
Jaguar, Land Rover, Mazda, Ford, Hyundai, BMW, MINI, Rolls-Royce
BMW, MINI, Jaguar, Land Rover
Toyota, Audi, BMW, MINI, Jaguar, Land Rover, Lexus, Rolls-Royce, Volvo
Americas & Africa
In South America, we have BMW Distribution and Retail businesses in Chile and Peru as well as Subaru operations across these
markets, Colombia and Argentina. We also hold the Distribution contracts and operate Retail for Daimler across four markets in the
region, and Suzuki in Costa Rica, Panama and Argentina. Our business in Ethiopia is centred on Distribution and exclusive Retail for
Toyota, while in Kenya we are the distributor and retailer for premium marques Jaguar Land Rover and BMW.
Country
Ethiopia
Djibouti
Kenya
Chile
Peru
Colombia
Argentina
Costa Rica
Panama
Uruguay
Ecuador
El Salvador
Business model
Distribution & Exclusive Retail
Distribution
Distribution & Retail
Distribution & Retail
Distribution & Retail
Distribution & Retail
Distribution & Retail
Distribution & Retail
Distribution & Retail
Distribution & Retail
Distribution & Retail
Distribution & Retail
Brands
Toyota, Suzuki, Komatsu, New Holland, Hino, BMW
Toyota, BMW, Komatsu
Jaguar, Land Rover, BMW, BMW Motorrad
BMW, BMW Motorrad, MINI, Subaru, Rolls-Royce, Hino, DFSK,
BMW, BMW Motorrad, MINI, Subaru, DFSK, BYD
Subaru, Hino, Jaguar, Land Rover, Mercedes-Benz, DFSK, Mack, Doosan, Dieci,
Subaru, Suzuki
Suzuki, JAC, Changan, Kubota
Suzuki
Mercedes-Benz, Freightliner, Fuso
Mercedes-Benz
Mercedes-Benz
32
Inchcape Annual Report and Accounts 2020
Daimler
In 2019 we signed our first ever Distribution contracts
with Daimler for both passenger and commercial vehicles in
Uruguay and Ecuador, followed swiftly by a further
agreement in January 2020 to become the distributor for
Mercedes-Benz passenger vehicles in Colombia. During
2020 we continued this consolidation of representation with
expansion with the brand into El Salvador.
Locations
Distribution
Colombia, Ecuador, El Salvador, Uruguay
Retail
UK
Inchcape Annual Report and Accounts 2020
33
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate social responsibility
Our business, our people, our future
Inchcape has long prided itself on a pioneering spirit of innovation, transformation and
expansion which has been at the core of our success as a trading company.
The business that we are now looks very different from that which was founded in the nineteenth century, but it is our
adaptability that will enable us to capitalise on the opportunities we find to enhance and grow our business in the future.
While the goods and services that Inchcape provides have changed, our purpose retains the same pioneering spirit,
motivating us to bring mobility to the world’s communities, for today, for tomorrow and for the better.
Our refreshed strategy has not only redefined our purpose as a business, but it also elevates the necessity to do business
responsibly. The Company is embarking upon a journey that will help to support global efforts towards a sustainable and
responsible automotive industry and create positive impacts on the societies and environment in which we operate.
This is not a short-term initiative, but a lifetime commitment. We will continue to update our shareholders on our plans and
progress regularly while we develop our position as a business known for taking its responsibility to all stakeholders seriously.
Our current CSR approach comprises three pillars: our people; health and safety; and the environment. For 2020, we
continue to report in this format.
Key findings saw an uplift in overall employee experience as
well as a significant improvement in satisfaction with the
frequency and content of communications.
1
Our people
Satisfaction
Our employee experience, satisfaction and perception of
Inchcape as a business has improved since the last full survey
+15%
Intent to recommend
Intent to recommend Inchcape as a place to work is very
high and increasing – our people are happy to work for
Inchcape
+6%
Communications
Significant improvement in satisfaction with communication,
both content and frequency, vs. the last survey
+57%
Fundamental to achieving our objectives, whether commercial
or strategic, is Inchcape’s most important asset: its people. We
aim, both at Group and market levels, to ensure that our
people’s value is recognised and rewarded; that talent is
developed through learning and progression; that our people
are engaged and communicated with effectively; and that all
employees are empowered to achieve their personal goals at
each stage of their career with Inchcape.
We are focused on creating a socially conscious culture based
on inclusivity and learning.
– We believe that the business is strengthened by embracing
diversity in the workplace and this is underpinned by market
relevant policies and practices.
– We foster a learning culture to enable people to optimise
their performance in role and truly realise their potential.
– We aim to empower our people to collaborate in
communities of practice; to share and work together,
knowing that their contribution is truly valued.
The approach we take to engaging and developing our
employees is designed to proactively defend the business
against Key risk L, see page 47.
Communication and engagement
Engaging with our community of colleagues is always
important, and a responsibility to which we give continual
focus, but during a year of unprecedented challenge for the
business and its people, talking to and hearing from our
employees was of greater significance than ever.
From the start of the year, with the COVID-19 crisis becoming
apparent in Hong Kong, we increased the frequency of
top-down communications from the Group CEO, also putting in
place a ‘cascade’ framework to support local leadership
communications. Regional, market and business unit
communications via video, ‘townhall’ and face-to-face briefings
were increased in regularity to ensure that managers, teams
and individuals had the most up to date information and
guidance throughout the period.
34
Inchcape Annual Report and Accounts 2020
We adapted our usual Employee Experience Survey (EES) to a
shorter pulse-check questionnaire of employees in July and
August. The objective was to understand the employee
experience in a more focused data set around the topics of
Leadership, Communications and Wellbeing. Specifically, we
wanted to know how the pandemic and its pressure had
impacted people and how the business had performed to
mitigate its effects and support the workforce.
Most of our employees were severely affected by lockdowns at
some point during the year, leading to prolonged periods of
working remotely for office-based workers or with a skeleton
staff in our sales and service centres. Recognising an
opportunity to build virtual connections between distanced
teams and reinforce the notion of a united global business, we
invited people to submit pictures or video clips of themselves
sending greetings to their colleagues which we compiled in
montages as ‘Together in Spirit’. This engagement campaign
spanned a week with a new montage sent to all colleagues via
intranet communications channels on five consecutive days.
Over 1,000 people participated, and we ran a similar
campaign at the end of the year, again with many hundreds of
employees contributing.
Leadership, talent and organisational design
Our Global Talent Review is conducted over a two-year cycle,
alternating a deep dive review with organisational health
checks to track progress, cement existing priorities, identify new
or changed priorities and to further inform the longer-term
Talent and Organisational Design Strategy. This is reviewed by
the Board on an annual basis.
Informing this process with accurate data is crucial to the
continued development of our long-term people strategy. Our
People Dashboard was developed to improve the quality and
availability of data, and this is now in use throughout the
business, updated on a monthly basis. The dashboard provides
insight that helps us to target improvements in diversity,
retention of talent and identification of high-potential individuals
as part of our succession strategy.
This succession strategy is
designed to attract, develop
and retain critical talent and to
build a diverse bench of
‘next-gen’ leadership. With a
matrix of levers at our disposal,
from resourcing practice to
facilitated learning and
employee networking, we
address critical skills and
capability development to
answer the requirements of our
business strategy.
We continue to leverage the
learning capabilities of our
online development portal,
hive, which gives a significant
proportion of our employees
access to thought leadership,
and leading-edge industry and
commercial insight relevant to
our growth strategy.
Inchcape Annual Report and Accounts 2020
35
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate social responsibility continued
2 Health and safety
The health and safety of all those who use our facilities,
whether employees or customers, is of the utmost importance
to us. We are committed to providing environments that can
be trusted as spaces in which to work, that are clean, safe and
promote a healthy work-life balance.
Our aim is to eliminate the occurrence of incidents and
accidents by continually challenging ourselves, sharing best
practices and investing in the systems and structure to support
our objectives.
This commitment is underpinned by the creation of a pan-
market Group HSE Community of Practice, whose primary
function is to embed a deep understanding of the importance
of a rigorous and supportive health and safety culture
throughout our business.
In year one of our programme of global HSE integration we
have made significant progress:
1. Inducted and trained regional and market level HSE team
members to the management and rollout of health and
safety standards
2. Implemented technology resource in all business units to
digitalise safety monitoring and management
3. Approx. 13,000 employees trained on system use, and
provided with access to safety processes and practice
standards
4. Established regional and market level safety metrics
5. 130 Policies, Procedures, Safety Talk topics & work instructions
translated into 17 languages, improving accessibility
6. Rolled out agreed Risk Management programmes for 2020
COVID-19 H&S response
In 2020, we were faced with an unprecedented
challenge to the health and safety of our people and our
customers as we worked hard to continue operating
under very difficult circumstances. As soon as the impact
of the pandemic to our business started to become
clear, business continuity plans were implemented which
included a pandemic plan to manage operations under
strict compliance controls. Inchcape’s global COVID-19
management control plans created strong disciplines
for the protection of both employees and customers in
line with local legislation. This, coupled with swift
responses to changes in the legislation, targeted
reducing the risk of exposure to infection at our sites
and minimising a risk of extended business interruptions
due to localised outbreaks.
Strict distancing measures and the provision of PPE
materials were introduced across all operational sites
and remained in place at the end of the year, continuing
into 2021. Many support office functions across the global
business switched to remote working which is still in
place, including for the plc head office, in all cases
following local government essential travel and
commuting guidelines.
Main activities
Group Risk Management
programmes (RMP)
How we have progressed in 2020
– Completed a review of risk management compliance
– Five core Risk Management programmes rolled out through the year
– Hoist Management
– Consultation
– Incident & Investigation
– Hazard Reporting – COVID impacted rollout
– Site Management Reviews – COVID impacted rollout
– A planned audit of site behaviour and practices to be undertaken post lifting of COVID-19
travel restrictions
Providing expert support
– Management training in responsibility for HSE underway
– Rollout of a diploma in health and safety targeting site operational managers to up-skill in
HSE Data Reporting capability
HSE knowledge
– Timeframe for completion end: Q2 2021
– Improving HSE reporting capability at both local and global levels is critical to internal
monitoring of progress to identify and make improvements
– Reporting functionality being developed with Power BI tools to provide all areas of the business
with HSE reporting functionality
Managing Communities of
Practice
– We set out to develop an internal ‘Diploma in Operational Health & Safety’
– Have now identified all Diploma training requirements and developed 60% of the training topics
36
Inchcape Annual Report and Accounts 2020
Emissions measurement
We continue to monitor our energy and emissions usage and
details of scope 1 and 2 emissions are given on page 98 of the
Directors’ Report. As many of our operations were closed due to
the pandemic, this has reduced significantly. However,
it is anticipated that business will return to more normal levels
in 2021, and with it an increase in energy used.
Initiatives to reduce energy usage are implemented at local
level, with businesses focusing on energy efficiency measures
such as managing showroom lighting outside of business
hours and assessing heating and cooling timers to ensure
optimum efficiency.
CDP submission
During 2020, the Group participated in the CDP (formerly the
Carbon Disclosure Project). Our overall score of C is in the
awareness band indicating the Group has knowledge of
impacts on, and of, climate issues. This is the same as the
Europe regional average, and same as the Trading, wholesale,
distribution, rental & leasing sector average.
The report highlighted the following areas for improvement
which will be a focus for 2021:
– Governance
– Reduction initiatives
– Business strategy and financial planning
We will continue to participate in CDP with the ambition to
improve our score as our businesses improve awareness
around the impacts of climate change. The work being carried
out as part of the TCFD project should enable us to improve
considerably in all of these areas.
3
Environment
There is increasing focus on climate-related issues from
governments, investors, OEM brand partners and customers.
Climate change has been considered by the Board in a
broader context when looking at future trends impacting the
industry such as electrification of the drivetrain. These trends
can present both risks and opportunities for the Group and
further information can be found in the Risk Management
Report on pages 41-50.
To date consideration of the impacts has been carried out
using best estimates, therefore in order to fully understand the
impacts, the Board has appointed The Carbon Trust to assist
the Group in analysing the transition and physical risks and
improving the Group’s climate-related disclosures as
recommended under the Task Force on Climate-related
Financial Disclosures (“TCFD”). The outcome of the assessment
will be reported in next year’s Annual Report and Accounts.
The Board will consider the broad landscape of climate-related
topics, forward looking exploration of business model
vulnerabilities and resilience, looking at financial impacts on
the Group from climate change and to identify climate-
related risks and opportunities and how they are managed.
In addition, the Board has updated its Matters Reserved for the
Board to ensure that oversight of climate-related issues is at
Board level.
The TCFD journey will cover the following
aspects:
– Internal engagement workshops to enable senior
management to assess potential climate challenges
faced by the Group
– Interviews with key stakeholders to assess current
climate-related activity
– Review of business model and strategy from a climate-
change perspective
– Review of risks and opportunities not previously
considered
– Review of climate-related risk processes and
procedures
– Scenario analysis to understand impact on
business model
– Disclose in line with the recommendations of the TCFD
in the 2021 Annual Report & Accounts
It is anticipated that the outcomes of the TCFD project will assist
in determining the appropriate emissions reduction targets for
the Group.
Inchcape Annual Report and Accounts 2020
37
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Non-financial information statement
The table sets out the non-financial information as required under the Non-Financial Reporting Directive.
Reporting requirement
Environmental matters
Employees
Social matters
Human rights
Anti-bribery and corruption
Relevant policy
Code of Conduct
Local Policies
Code of Conduct
Code of Conduct
Code of Conduct
Modern Slavery Statement
Code of Conduct
Gifts and Hospitality policy
Where to read more
CSR Report
Page
37
34-35
98-100
CSR Report
Directors’ Report
See below
See below
Code of Conduct
Business model
n/a
Our business model
10-19
The Group’s business model, including the value chain, is on pages 10-19.
Engagement with key stakeholders is set out on pages 18-19.
Principal risks are given on pages 44-49.
The Code of Conduct is available at www.inchcape.com
Code of Conduct
The Group’s Code of Conduct was launched in 2018 with
training rolled out to all markets in 18 languages. Within the
first three months of joining the Group, all new employees
undertake training on the Code of Conduct as part of their
induction process. Where employees do not have access to
a computer, we have ensured that they are made aware of
the Code and what is required of them through various
non-digital means.
The purpose of the Code is to provide a guide to ethical
business conduct. It is approved by the Board and is an
important reference point for employees. It sets out the
minimum standards of behaviour expected of employees,
helps them to make ethical decisions and shows how they
can identify potential misconduct. The Code aims to keep
employees safe and protect the Group’s reputation among
customers, OEMs and other suppliers and shareholders.
The Code covers:
– Ethical decision-making
– Speakup! – the whistleblowing hotline
– Equal opportunities including diversity and inclusion
– Anti-harassment
– Health & Safety
– Business reputation
– Anti-bribery
– Gifts & hospitality
– Conflicts of interest
– Competition, anti-trust, trade laws
– Personal data
– Customer relations
– Commitment to OEM brand partners and suppliers
– Commitment to shareholders and stakeholders
– Commitment to community
– Protecting assets and financial integrity
Environmental matters
Each of our OEM brand partners have developed
comprehensive sustainability programmes and the automotive
industry in general has made significant progress in reducing
vehicle emissions. We work with OEM brand partners who are
at the forefront of technological advances to improve fuel
38
Inchcape Annual Report and Accounts 2020
efficiency and to develop alternative powertrains, such as
electric and hybrid. We ensure that our business model and the
infrastructure are in place to support the changing industry and
to be able to deliver cleaner technologies to our customers as
their preferences change.
As an automotive distributor and retailer, we do not have a
manufacturing footprint to manage, however, we use energy
in our dealerships, transport cars and parts globally and have
an impact from business travel. We measure and report our
greenhouse gas emissions which are given on page 98.
Further information on the Board’s commitment to the Task
Force on Climate-related Financial Disclosures can be found
on page 37.
Whilst we do not have a global environmental policy, each
business is committed to monitoring its energy usage and to
managing energy in the most efficient way and the Code of
Conduct sets out the expectation that employees:
– Seek all opportunities to reduce waste and energy usage,
to recycle where possible and to switch off appliances when
not in use;
– Favour the use of environmentally supplies and materials;
and
– Look for opportunities to reduce business travel where possible.
Employees
Our employees are integral to the delivery of the Group’s
strategy. Failure to attract, retain and develop our people is a
principal risk for the Group and the description, impact and
mitigating actions taken by the Group are given on page 47.
As the industry experiences a period of significant change,
we continually review the skills of our employees to ensure
we can deliver for customers and OEM brand partners.
Training and development programmes are carried out
within each business and include various initiatives such
as technician programmes, apprenticeships and leadership
development programmes.
An Employee Experience Survey is carried out globally to ensure
that we understand the views of our employees. Further
information is on page 35. The outcomes of the survey are
reviewed by the CSR Committee which monitors action plans
implemented by management to address any issues which
arise. The Chair of the CSR Committee reports on this
engagement process to the Board.
We are making improvements on how we collate and manage the data on our people and have created a ‘People Dashboard’
which will enable us to track the employee journey. This data will allow us to monitor people KPIs to gain an understanding of where
improvements can be made. Employee-related policies are implemented at a local level and include policies on pay and rewards,
flexible working, and maternity and paternity policies.
Human rights
We embrace, support and respect the human rights of everyone we work with and we comply with appropriate human rights
legislation in the countries in which we operate.
We did not receive any reports of human rights abuses during 2020. We do not use or accept forced, bonded, involuntary or child
labour. We only employ people who choose to work freely and respect their rights to equal opportunities and freedom of association.
Social matters
We believe in supporting the different cultures and communities in which we operate, often through sponsorship and support for
local charities or local people. All our colleagues can be involved in such initiatives and can expect to be supported by Inchcape in
their efforts to help local communities. We do not have a global policy covering specific social matters and any initiatives are
governed by the local business.
Many of our local operations recognised an urgent need for logistical support and the role they could play as the COVID-19
pandemic took hold in communities across the world. Ranging from temporary donation of unused test-drive and courtesy vehicles
to delivery services for hard-to-reach geographical areas, our people contributed time and the Company’s temporarily under-
utilised resources to help those in need.
Initiatives across the Group include:
Market
Europe
APAC
Americas &
Africa
Community activity
In Greece, Toyota Hellas and our dealer network provided municipalities across the market with 150 vehicles,
facilitating transport for medics to reach the elderly, unwell and people with reduced mobility as part of the
government’s ‘Help at Home’ scheme. In Finland, our teams have donated Land Rover vehicles to the Finnish Red
Cross to help access vulnerable people in remote or hard-to-reach areas; and in Lithuania the JLR teams have
given similar support to food bank initiatives to help with deliveries to the elderly.
In Brunei, our marketing team at the flagship showroom and head office used advertising hoardings to display
health awareness information, helping to protect customers and staff. The prominent display also targeted
passing commuters and road users, prompting recognition by several government ministers who expressed their
appreciation to Inchcape Brunei’s management. Malaysian workers opted to remain in Singapore after the
borders between the two countries were closed, to enable operations to continue supporting local community
needs at as close to normal levels as possible.
In Chile, the Subaru team donated eight vehicles for three months to health authorities in Santiago, allowing them
to deliver medicines and food to 1,600 families including visits to elderly and isolated people. Far from being a
temporary partnership, this is a continuation of a partnership between Subaru Chile and the municipality that has
been in place for seven years. In Ethiopia, MOENCO donated Land Cruiser ambulances to the Ethiopian Federal
and Regional Governments to support the fight against COVID-19. In Uruguay, our Mercedes-Benz business
provided specialist technicians to the health service to help keep the ambulance network on the road.
Anti-bribery and corruption
We have a global policy which is available to all Group employees via iConnect, the Group’s global intranet. The policy states our
zero-tolerance stance to bribery and corruption and mandated procedures. In 2021, some employees will be required to complete
an online training module. This will also be included in the induction programme for new employees whose role and remit require
additional focus in this area. Programme compliance is monitored via reports to Speak Up!, the external whistleblowing channel,
and adherence to other relevant policies such as the gifts and hospitality policy.
Reports to Speak Up! are monitored by an independent third party. Reports on anti-bribery and corruption matters are escalated to
the Risk Committee and, if significant in nature, are reported to the Audit Committee. The Risk and Audit Committees monitor
management’s response to any issues and the implementation of any action plans deemed necessary.
As part of our monitoring and assurance procedures in 2020, the Internal Audit team carried out anti-money laundering audits
across the Americas. The objective of these reviews was to assess the effectiveness of the Anti- Money Laundering (“AML”)
programme and specific compliance with local regulations. The audit also covered adequacy of AML Policies and Procedures;
monitoring, supervision and compliance; and due diligence and knowledge of employees, customers, suppliers and training
programmes in place. The review confirmed strong alignment to local regulations with opportunities to further strengthen the local
framework, particularly in relation to reporting frequencies.
Inchcape Annual Report and Accounts 2020
39
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Suzuki
We have a long-standing partnership with Suzuki of over
40 years, the majority of that time being in Singapore. We
significantly expanded this relationship in 2018 through
acquisition and the awarding of Distribution contracts in
Costa Rica and Panama. This expansion added to our
established South America platform with our first move into
Central America and the addition of two brand new
markets to our global portfolio.
Locations
Distribution
Argentina, Costa Rica, Panama, Singapore
40
Inchcape Annual Report and Accounts 2020
Risk management
Resilience in a dynamic environment
Last year, the Chairman highlighted a resilient underlying performance in the face
of short-term challenges. 2020 has presented a different set of risks and the resilience of our
global business was again tested.
2020 marked the start of a decade in which the automotive
industry will undergo a period of rapid change and disruption,
driven by new technology and a changing climate. A decade
in which flexibility and resilience will be key. It has begun with
the arrival of the COVID-19 pandemic, which impacted our
people and our operations worldwide and tested the resilience
of our business. Risk levels in many areas – including cyber and
health and safety – have increased and will remain elevated.
We responded quickly to minimise the impact of the virus on
our people, our operations and our financial performance. We
reduced our cost base and deployed new ways to trade. We
are encouraged that our results have exceeded expectations,
but are mindful that the situation remains dynamic. Put in
context, COVID-19 is just one of a number of material risks
which all businesses in our sector must successfully navigate.
Our approach to risk management and internal control will
continue to evolve to meet these challenges.
We seek to identify and address our most material risks through
our systems of risk management and internal control. In this
section of the report, we summarise how this system works,
along with management’s assessment of our Principal Risks. We
comment on our response to COVID-19 specifically, as well as
our plans to evaluate and address longer-term, climate-related
risks. In the Viability Statement, we consider the financial viability
of the Company, should one or more of these risks materialise
in a catastrophic manner.
Inchcape’s systems of risk management
and internal control
Throughout the year, the Group has maintained and improved
its systems of risk management and internal control, which are
designed around an established ‘three lines of defence’ model
(see page 42). This model engages management teams,
corporate functions and independent assurance to manage
risk, overseen by the Board and its Committees.
These three ’lines of defence’ implement, oversee and test the
Company’s system of risk management and internal control.
This system is made up of a number of inter-connected
activities and processes, including: our strategy and operating
plans; budgeting and planning activities; our framework of
policies and procedures; performance monitoring; internal
controls (such as those over financial reporting or IT security, for
example); our framework for managing enterprise-wide risks;
our legal and regulatory compliance programmes; and our
internal audit programme. Together, these and other activities
identify, prioritise, manage and monitor key risks to our
business. Our enterprise risk framework brings all of this
information together to provide management with a single view
of risk and control, allowing resources to be allocated efficiently
to the areas of greatest risk.
In 2020, we improved our approach to internal financial
controls, strengthening the Group’s defences against risks of
fraud and financial mis-statement.
As we approach a period of rapid change in our industry, the
Group will continue to review and improve the effectiveness of
its system of risk management and internal control each year.
Our response to COVID-19
COVID-19 began impacting our business at the start of the year, initially in Asia, before rapidly spreading to all markets.
In the short term, the virus threatened the health and safety of our employees and our customers, forcing the closure
of our operations and disrupting our OEM partners and our supply chain. In the longer term, the pandemic has the
potential to continually disrupt operations through health exposures to employees and customers, to suppress
demand, to reduce the availability of credit and to possibly delay the launch of new vehicles and models. It may
accelerate the introduction of disruptive business models and it may trigger consolidation in our market place.
The Company responded quickly to address the immediate challenges, introducing a set of safe operating practices
in all markets and auditing compliance. Employee wellbeing programmes were introduced and more frequent
employee surveys were conducted. Website and other digital trading capabilities were upgraded during the year. We
liaised with our OEM partners to optimise the allocation of vehicles and prevent the accumulation of excess stock. The
Company accessed various government-sponsored ‘furlough’ schemes in the UK, Australia and Singapore and it
secured a temporary £100m borrowing facility under the UK CCFF programme. This borrowing was repaid in full. The
Board of Directors and senior management agreed to a temporary 20% reduction in their remuneration. Dividend
payments and the share buyback scheme were suspended. The Group undertook a cost-reduction programme,
which delivered over £90m in savings. These and other factors, such as our geographic diversity, enabled us to deliver
resilient results for shareholders.
Looking further ahead, the Company began a review of its strategy to assess its continued relevance in light of current
industry trends, many of which have been accelerated by the pandemic. The Company will also be reviewing its
contingency planning arrangements in 2021.
Despite these measures, the impact of the virus remains material and will be closely monitored through 2021.
Inchcape Annual Report and Accounts 2020
41
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Risk management continued
Our approach to risk management and internal control
Inchcape deploys ‘three lines of defence’ to manage risk,
overseen by the Board and its Committees.
Board, Audit Committee and Executive Committee
Sets strategy; sets risk appetite; reviews principal and emerging risks
twice per year; reviews system of risk management and internal control
Risk, control and assurance reports.
1st LINE
Front line business operations
Implement strategy, policies,
procedures and controls.
Manage risks on
a day-to-day basis.
2nd LINE
Corporate functions
Set policies and procedures.
Monitor risks and controls .
Oversee risk improvement
programmes.
3rd LINE
Independent assurance
Tests the design and
effectiveness of policies,
procedures and controls
implemented by the 1st and
2nd lines.
Risk management in 2020
Risk activity in 2020 was dominated by COVID-19 and its impact on the Group’s risk profile. A dedicated taskforce was assembled
early in the year to monitor and respond to the impacts of COVID-19. In addition to the immediate risks presented by the pandemic
and managed by front line teams (1st line), elevated risks were identified by second line functions in relation to cyber risks, IT systems
and health and safety. A series of internal audits (3rd line) were launched to test the effectiveness of key controls in light of COVID
- especially those requiring a physical presence. As part of the routine risk management cycle, leadership teams in all markets and
regions met twice during the year to reassess significant risks of all types; to review current mitigation and, if necessary, to initiate
action plans. Reports were submitted to the Group Risk team, highlighting the most important risks and the measures being taken to
address them. The Group Executive Team met in June and again in November to review the reports from each region and to
reassess the Group’s principal risks. An enhanced cyber security programme was initiated following updated risk assessments. In
November, the Audit Committee met to review the overall effectiveness of the Company’s system of risk management and internal
control. The Board met to consider the Group’s principal risks and review the Group’s risk appetite.
Risk appetite: where are we willing to take risk?
A cornerstone of the Group’s approach to risk management is the Board’s determination of its risk appetite. This definition provides
direction to all three lines of defence on acceptable levels of risk. The Board considered its risk appetite in relation to each of the
Group’s principal risks, using three broad categories to define the nature and extent of risks it is willing, or required, to accept.
Appetite
Principal risks
Strategic risks
Inherent risks
Managed risks
Risks directly addressed
by our strategy
Moderate to high
– Acquisition ROI
– Portfolio optimisation
– Digitisation
– Loss of OEM contract
– Mobility solutions
– Electrification
External risks where our
influence is limited
Moderate to high
– Availability of credit
– OEM brand damage / supply
chain disruption
– Foreign exchange
– Political risks
– Legal and regulatory change
– Pandemic (COVID-19)
– ‘Brexit’
Risks where we can exert
significant influence
Low to moderate
– Cyber incident, data breach
– IT systems failure
– Health and safety
– Legal and regulatory
compliance
– Fraud
– People
42
Inchcape Annual Report and Accounts 2020
New
Risk has increased
No change
Principal risks to the achievement of our strategy
Changes this year
The COVID-19 pandemic and ‘Brexit’ were added to the heatmap of principal risks during the year under review. The potential for a
material cyber incident or data breach (risk ‘D’) has increased, as the volume of cyber attacks increased during the pandemic. A
major programme of work is underway to address recently-identified gaps in our cyber security capability. As a result, the related risk
of IT systems failure or interruption (risk ‘K’) has also increased, particularly relating to some of our legacy technology systems and
infrastructure. Health, safety and environment-related risks increased (risk ‘N’) as new ways of working were introduced and certain
checks and controls operated less effectively during the pandemic. Health, safety and environmental risks were reassessed in more
detail in 2020 and their rating has been increased as a result.
The risk heatmap below shows the Group’s principal risks before mitigating measures are applied.
A
J
R
S
M
l
a
c
i
t
i
r
C
E
G
F
H
K
L
O
N
P
Q
B
C
D
I
y
t
i
r
e
v
e
S
h
g
H
i
i
m
u
d
e
M
w
o
L
Low
Medium
Likelihood
High
The materialisation of these risks could have an adverse effect
on the Group’s results or financial condition. If more than one of
these risks occur, the combined overall effect of such events
may be compounded.
The chart shows management’s assessment of material risks
before mitigation. Various strategies are employed to reduce
these inherent risks to an acceptable level. These are
summarised in the tables on the following pages. The
effectiveness of these mitigation strategies can change over time,
for example with the acquisition or disposal of businesses. Some
of these risks remain beyond the direct control of management.
The Risk Management programme, including risk assessments,
can therefore only provide reasonable but not absolute
assurance that risks are managed to an acceptable level.
The Group faces many other risks which, although important
and subject to regular review, have been assessed as less
significant and are not listed here. These include, for example,
natural catastrophe and business interruption risks and certain
financial risks. A summary of financial risks and their
management is provided in note 24 on pages 161-168.
Risk
A
B
C
D
E
F
G
H
I
J
Loss of Distribution contract
Digitisation
COVID-19
Cyber incident, data breach
OEM brand damage / supply
chain interruption
Acquisition ROI
Political risk, social unrest
Legal / regulatory compliance
Legal / regulatory change
Foreign exchange
K
L
M
N
O
P
Q
R
S
IT systems failure / interruption
People: retention &
development
Credit retrenchment
Health, safety, environment
incident
Disruption: go-to-market model
Fraud, financial mis-statement
‘Brexit’
Electrification of the drivetrain
Portfolio optimisation
Risks and opportunities presented by
climate change
As a distributor and retailer of petrol and diesel
vehicles, climate change and the transition to a
low-carbon economy present inherent risks and
opportunities for Inchcape plc. Some of these
are already Principal Risks for the Company,
including the increasing electrification of vehicle
drivetrains or future legislation banning the sale
of petrol or diesel vehicles. These risks will
materialise in some markets quicker than others
and could impact the business model in various
ways in the medium and longer term. To date
the impacts of climate change have been
best estimates. During 2021, the Company is
undertaking an assessment of climate-related
transition and physical risks as proposed by
the Task Force on Climate-related Financial
Disclosures and will report on those findings
next year.
The following pages provide further information on each of our
principal risks – what they are, how they have changed and
how they are managed.
Inchcape Annual Report and Accounts 2020
43
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Risk management continued
The Group’s principal risks
A – Loss of Distribution contract
Risk level before mitigation:
Trend
Severity: Critical
Likelihood: Low
Description and impact
Commentary for 2020
Mitigating actions
The Group has individual Distribution contracts,
many of which are long-standing. The loss of
such contracts would have a significant impact
on revenue and profit, as well as future growth
opportunities. The cancellation of a number of
smaller contracts at the same time could have a
similar impact.
The underlying factors which could contribute to
this risk may include:
During the year, the Group won new
Distribution contracts in South
America and Europe. This further
diversifies our contract base.
During the pandemic, we have
strengthened ties with many of our
key OEM partners, who have worked
closely alongside us to jointly address
the challenges presented this year.
– Unattractive value proposition for OEM
partners;
– Failure to meet OEM standards;
– Non-compliance with the terms of Distribution
agreements;
– Failure to deliver growth strategy;
– New competitors;
– Major fraud, bribery, data security or other
operational failure.
B – Digitisation
– OEM relationships held at all management levels.
– Regular performance reviews of OEM standards
and targets.
– Partner Development Teams to solve common
global issues.
– Executive ‘deep-dives’ into core brand partners.
– Dedicated training programmes on OEM criteria
and expectations.
– Employee reward linked to delivery of OEM
standards.
– Investments to improve customer experience
and to efficiently deliver to volume expectations.
– Targeted M&A.
– Legal and regulatory compliance programmes.
– Compliance and internal audit reviews to
monitor adherence to OEM standards.
Risk level before mitigation:
Trend
Severity: High
Likelihood: High
Description and impact
Commentary for 2020
Mitigating actions
The digitisation of the customer journey and
growth of online customer platforms present the
opportunity to improve the customer offering and
grow market share.
At the same time, digital platforms may enable
our OEM partners, or new competitors with new
business models, to directly access our customer
base. These trends might change the nature of
both vehicle distribution and retail.
If we fail to keep pace with the digital solutions
offered by our competitors and others, we may
lose market share, our OEM relationships may be
weakened and our position in the value chain
may be threatened.
C – COVID-19 pandemic
COVID-19 has accelerated the need
to transact digitally, with less physical
interaction.
Our OEM partners and new
competitors continue to pilot and
develop direct sales capabilities
based on digital sales platforms. This
may change the role of our Retail
business in the sales process, or may
make it redundant. It may change
the way in which we stock and
distribute vehicles.
– Strategy review to ensure our plans for the future
of the business reflect the latest market
dynamics.
– Execution of omni-channel experience, through
development of digital capability: including
enhanced data analytics, marketing capabilities,
online service bookings, digital walk-around
checks and e-commerce capabilities for parts
and accessories.
– Group and market level monitoring and
management of social media sentiment.
– Proactive engagement with our OEM partners to
understand their ‘Connected Vehicle’ strategies.
Risk level before mitigation:
Severity: High
Likelihood: High
Trend
NEW
Description and impact
Commentary for 2020
Mitigating actions
This risk relates to the possibility of continued or
more severe incidences of COVID-19, along with
continued restrictions on movement and
commercial trading. These restrictions may
stretch through H1 2021 with a subsequent
delayed economic recovery beyond that period.
A continuation or worsening of the pandemic
could threaten the health and wellbeing of our
colleagues and our customers. It would impact
the Group’s global trading performance and
cash flows. It may lead to increased pressure on
margins from OEMs; reduced capital availability
for both the Company and for our customers;
and supply chain interruptions. There is the
potential for political and social unrest.
In the longer term, it may accelerate trends such
as digitisation and introduce new business
models or new ways of working, to which the
Group must successfully adapt (see risk ‘B’).
Following the initial impact of the
virus in Q2, business performance
has been resilient. The business saw
an improving trend in New, Used and
Aftersales revenue streams. The
Group outperformed market volumes
and cash flow generation was
positive.
Although regulatory approval for a
vaccine has arrived in many markets,
the virus continues to mutate and the
situation remains dynamic and
unpredictable. The long-term
macro-economic impact of the
pandemic is yet to be determined.
– Measures at all sites to reduce infection risk.
– Non-customer-facing staff working at home.
– Pandemic plans established, along with other
health and safety measures and guidance for
colleagues; a wellbeing programme to support
colleagues through the pandemic and
increased frequency of Employee surveys.
– Frequent customer communications by email
and on our websites.
– Cost-reduction programmes; enhanced
monitoring of working capital and delaying
discretionary spend.
– Accelerated roll-out of digital trading capabilities.
– Optimising inventory levels and liaising with OEM
partners to allocate supply.
– Use of government-sponsored ‘furlough’ schemes
in the UK, Australia and Singapore.
– Temporary £100m borrowing facility under the
UK CCFF programme, repaid in full.
44
Inchcape Annual Report and Accounts 2020
D – Cyber incident / data breach
Risk level before mitigation:
Trend
Severity: High
Likelihood: High
Description and impact
Commentary for 2020
Mitigating actions
As we invest in our digital capability, gather and
hold more data and rely ever more heavily on
technology and mobile devices, we open up
new opportunities for cyber attacks, many of
which are well-funded and well-organised.
Attacks can be aimed at accessing confidential
data, extracting money, or causing business
interruption.
The Group operates many websites and IT
systems across its markets, some of which have
been operating for many years. Some of these
systems are provided by our OEM partners and
are not under Inchcape’s direct control.
During the year, businesses in some markets
experienced attacks, which interrupted business
operations. While not material to the Group,
these successful attacks indicate the challenges
present in fully protecting our systems and data
from an ever-changing threat.
A combination of factors drove an
increase in the Group’s exposure to
cyber risks in 2020. There has been a
general increase in the frequency
and intensity of cyber attacks during
the pandemic.
As the Group grows its digital
capabilities, it becomes more reliant
on fewer IT systems and the data
they hold.
During the year, an assessment of
the Group’s IT security landscape
was completed and a programme
of work launched to address gaps
identified. We appointed a new
Chief Digital Officer in October and
refreshed and strengthened our
framework of IT security controls.
– Data management policy and approach.
– Dedicated Information Security resources.
– IT security policy, setting out the standards and
controls expected of each business.
– Audits and other reviews to monitor compliance
with those standards.
– Mandatory cyber security training.
– Global, standardised anti-virus and web-proxy
solutions.
– Programme of investment to address weaknesses
identified.
– Security assessments of third party vendors,
which is vetted by the Group’s Information
Security Officer.
– Incident response and disaster recovery plans.
E – OEM brand damage / supply chain disruption
Risk level before mitigation:
Trend
Severity: High
Likelihood: Medium
Description and impact
Commentary for 2020
Mitigating actions
As a distributor and retailer, our performance is
intrinsically linked with that of our OEM partners.
Our partners may be exposed to risks such as
adverse publicity, product recalls or supply chain
interruptions. Such events may adversely affect
our customer experience and demand for the
vehicles we offer. It may lead to reputational
damage for our brand or may lead us to be
involved in product recalls.
While we work closely with our OEM partners to
foresee and address issues, we may have limited
control over the prevention and management of
these risks.
COVID-19 has caused production
backlogs at a number of our OEM
partners, as manufacturing sites
have been required to close or
operate at reduced capacity. This
has affected some brands in some
markets, but has been managed
and it has not materialised in a way
that is significant to the Group.
There remains the potential for
short-term supply chain disruptions
between the UK and EU member
states as new trading arrangements
become operational.
– Brand and geographic diversity.
– Close engagement and dialogue with our key
OEM partners.
– Business continuity planning.
– Inventory management and monitoring
procedures.
– Customer communication.
F – Acquisition Return on Investment (ROI)
Risk level before mitigation:
Trend
Severity: High
Likelihood: Medium
Description and impact
Commentary for 2020
Mitigating actions
This risk relates to a failure to achieve sufficient
return on investment from our acquisition
strategy. This in turn would lead to higher
leverage, reduced EPS and/or deterioration of
relationships with OEM partners.
Inorganic growth through selected acquisitions
forms an active part of the Group’s current
strategy. Management will continue to actively
pursue opportunities as they arise. Many of those
opportunities are in developing markets or in
markets that are new to us. Such acquisitions
may comprise smaller operations with less
sophisticated systems and processes.
Failure to identify appropriate targets, acquire
them on optimal terms, or to efficiently integrate
new businesses into our operation will adversely
impact our ability to deliver the benefits expected
from those acquisitions.
Impairments were recorded in 2020
for previous acquisitions made.
The Company continues to pursue
inorganic growth opportunities and
this risk remains relevant. In 2020, the
Company completed new deals with
Daimler in Colombia and El Salvador,
MINI in Chile and Peru, BMW
Motorrad in Peru and with JLR in
Poland.
– Regionally-driven integration strategy, supported
by Group specialist functions.
– M&A Committee and Board oversight of process.
– Top-down and bottom-up approach to target
identification.
– Dedicated business development team to
project manage M&A.
– Partnering with OEM where appropriate to align
expectations and requirements.
– Valuation and due diligence processes,
supported by specialist advisors.
– Additional performance focus for newly acquired
businesses.
– Implementation of Group policies, procedures
and control framework in each new business.
– Internal Audit focus within six months of
acquisition.
Inchcape Annual Report and Accounts 2020
45
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Risk management continued
Key
Climate change-related risk
G – Political risk, social unrest
Risk level before mitigation:
Trend
Severity: High
Likelihood: Medium
Description and impact
Commentary for 2020
Mitigating actions
There is a risk that political and social instability in
one or more of our markets leads to economic
uncertainty, market interruption and/or threats
to the safety of our employees.
The Group operates in emerging markets where
there may be greater volatility in the political,
economic and social environment.
We accept that there is a risk of social and
political instability globally and that certain
political and social issues could have a
destabilising effect on the global economy.
Rising eco-activism could impact the
automotive industry.
There was political and social unrest
in some markets, including in Chile,
Africa and Hong Kong during the
year, which caused the temporary
closure of some of our dealerships.
There is the potential for further social
unrest and political change as
governments in all markets (including
mature democracies) impose
restrictions on individual freedoms
in an effort to tackle COVID-19.
– Close monitoring of political situation in
higher-risk markets.
– Business continuity planning.
– Collaboration with OEM partners on stock
allocation flexibility.
– Greater emphasis on digital marketing and
sales initiatives.
– Where appropriate, industry-wide collaboration
in response to political or social unrest.
H – Legal / regulatory compliance
Risk level before mitigation:
Trend
Severity: High
Likelihood: Medium
Description and impact
Commentary for 2020
Mitigating actions
The Group, and its businesses, are subject to a
wide range of existing laws and regulations
across a range of markets, from those where
regulatory frameworks are still developing to
mature, highly-regulated markets. The
consequences of a failure to comply with those
laws and regulations can vary from small fines,
and orders to take remedial actions, to significant
financial consequences, reputational damage
and imprisonment of directors and officers.
Regulation to which the Group is subject
includes, for example, anti-bribery and
corruption, data protection, health and safety
and anti-money laundering regulation or rules
relating to the distribution and sale of finance
and insurance products.
Restrictions on travel arising from the
current pandemic have impacted
aspects of our compliance
monitoring programme, e.g. the
ability to physically inspect sites or
conduct certain audits to monitor
compliance with health and safety
legislation. We do not believe these
constraints have had a material
impact on our ability to meet our
legal and regulatory compliance
obligations.
– Group-wide Code of Conduct, with associated
training.
– Nominated legal representative and/or retained
counsel in major markets to monitor existing and
emerging legislation.
– Online training relating to specific laws and
regulations.
– Market-level policies and procedures, supported
by Group-wide policies for higher risk areas.
I – Legal / regulatory change
Risk level before mitigation:
Trend
Description and impact
This risk relates to changes in legislation or the
way that legislation is applied. These changes
may directly affect customer demand for certain
vehicle types or our ability to generate income
from Aftersales.
The most significant changes relate to proposed
restrictions on vehicle emissions or restrictions on
the sale of new petrol or diesel cars.
Commentary for 2020
In response to a changing climate,
governments in some markets have
this year proposed legislation to
further curb vehicle emissions or to
ban sales of petrol and diesel
vehicles beyond a certain date (e.g.
UK – 2030). Other markets, such as
Singapore and the EU, have also
signalled their intention to introduce
similar legislation.
J – Foreign exchange
Description and impact
This risk relates to fluctuations in exchange rates
with negative impact on financial performance.
We operate in many different countries with
different functional currencies. In doing so we
accept the risk that, outside of normal hedged
transactions, we are exposed to currency
fluctuations. These can be both positive and
negative.
46
Inchcape Annual Report and Accounts 2020
Commentary for 2020
Currency markets have been
significantly impacted by the
COVID-19 pandemic in 2020.
Severity: Medium
Likelihood: High
Mitigating actions
– Review of current strategy in light of changing
market trends.
– Nominated legal representative in major markets
to monitor emerging legislation.
– Close liaison with OEM partners on product
development.
– Natural hedge provided by working with a range
of OEM partners in a range of markets.
Risk level before mitigation:
Trend
Severity: High
Likelihood: Low
Mitigating actions
– Natural hedging from geographical diversity.
– Local billing arrangements with brand partners in
most markets (excl. certain brands in Australia
and Americas).
– Use of forward currency exchange contracts to
hedge transactional exposures (e.g. Yen and
AUD).
– Analysis / stress testing of Group sensitivity to
foreign exchange exposures.
K – IT systems failure / interruption
Risk level before mitigation:
Trend
Severity: Medium
Likelihood: Medium
Description and impact
Commentary for 2020
Mitigating actions
Our business performance and our ability to
service our customers and OEM partners
depends upon the ability of our systems to meet
expected levels of operational reliability.
We have continued our programme
to standardise the core applications,
processes and controls, which
support our business.
We have a diverse and complex IT landscape
with multiple potential points of failure. Some of
our legacy IT systems have been operating for
many years. We operate in emerging markets
where technology infrastructures, such as the
internet, may be unstable.
Many of our core services are held on, or reliant
on, cloud-based services provided by third
parties.
We appointed a new Chief Digital
Officer in October.
We refreshed our IT General Controls
and our IT Security Controls. These
changes are being implemented.
They include for example, the
increased use of two-factor
authentication and the consistent
deployment of anti-virus solutions.
– Back-ups and built in resilience for all major
systems.
– Resilience testing for all new implementations
prior to go-live.
– Incident management, disaster recovery and
continuity plans.
– IT General Controls in place and audited.
– Availability criteria built into SLAs with third-party
hosts.
– Service providers all appropriately accredited.
– Third-party providers are security risk-assessed.
– Physical and logical security in place with active
monitoring for core systems.
L – People retention and development
Risk level before mitigation:
Trend
Severity: Medium
Likelihood: Medium
Description and impact
Commentary for 2020
Mitigating actions
The fragmented nature of the automotive sector,
coupled with remuneration strategies which
typically reward short-term performance, mean
that the industry is characterised by inherently
high turnover rates, especially in retail businesses.
Our strategy, as well as the impact of disruptive
trends and emerging technologies in the
automotive industry, mean that the skills and
capabilities needed to succeed are constantly
changing. Not having the right talent succession
plans, and diversity at all levels, may compromise
our ability to deliver our strategy.
COVID-19 has impacted our people
in many ways. We have new
operational procedures at our sites
around the world and many
colleagues are working from home.
In response to COVID-19, we
implemented a cost-reduction
programme and parts of our
business have undergone
organisational restructures. All of
these factors may adversely affect
the motivation and engagement
levels of our employees.
– Employee survey and measurement in all
markets.
– ‘Together in Spirit’ programme.
– Global Talent Strategy to ensure resources are
aligned to strategy.
– Annual talent review of leadership and
management teams in all markets and functions.
– Organisational Health, Talent and Succession
review with Executive team.
– Recruitment, induction and continuous
development policies in all markets.
– Drive5 performance drivers (behaviours)
underpin development process.
– Performance-related pay structure calibrated to
incentivise and drive talent retention.
– Restructuring where necessary to right-skill the
business.
M – Credit retrenchment impacts demand
Risk level before mitigation:
Trend
Severity: Medium
Likelihood: Medium
Description and impact
Commentary for 2020
Mitigating actions
Global economic uncertainty may ultimately
lead to a reduction in readily-available,
affordable credit. This is fundamental to our
customers’ ability to buy, and to our, and our
dealers’ ability to operate. Whilst we have various
local initiatives in place to help our customers
and dealers access appropriate finance, we are
also reliant on our banking and OEM partners to
provide suitably attractive options.
This risk did not materialise in 2020 in
a way that has materially impacted
our business.
The longer-term impacts of COVID-19
are as yet unclear. Material
macro-economic impacts, including
a reduction in available credit,
may materialise.
– Monitoring of credit availability.
– If required, the Company would take appropriate
cost-reduction or other measures to respond to a
downturn in economic activity.
Inchcape Annual Report and Accounts 2020
47
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Risk management continued
Key
Climate change-related risk
N – Health, safety, environmental incident
Risk level before mitigation:
Trend
Severity: Medium
Likelihood: Medium
Description and impact
Commentary for 2020
Mitigating actions
The Group’s activities include manual activities
and the operation of machinery and vehicles,
sometimes in confined spaces. These activities
expose our colleagues to the risk of serious or
fatal injury. The use of and disposal of chemicals
and other substances risks harm to the
environment.
Our colleagues’ mental and physical wellbeing
could be harmed as a result of workload,
organisational restructuring or as a result of
external factors (such as the current pandemic).
We changed a number of our
operating procedures in response to
COVID-19. This, combined with
reduced staffing levels in some
locations, has restricted our ability to
undertake certain physical checks
and inspections and may temporarily
increase health and safety
exposures. We also reviewed and
reassessed health and safety risks
across the Group and continue to
implement a new framework for
managing health and safety risks.
Employee uncertainty increased
during the year as we faced the
impact of COVID-19 and business
cost reduction.
– HSE strategic plans developed in all markets.
– Risk assessments updated.
– Inchcape Global Standards of Safety continue to
be implemented in local markets.
– Targeted risk management programmes being
rolled out to address key exposures.
– Single H&S system and reporting tool
implemented across 34 territories and
17 languages.
– HSE Director has undertaken a global audit of
H&S practices and standards.
– Global Community of Practice implemented.
– Global and Local Health & Safety policy rollout
compliant with local legislation.
– Qualified Health & Safety practitioners in
major markets.
– First responders appointed and trained in
most markets.
– Leading and lagging KPIs.
O – Disruption: go-to-market model
Risk level before mitigation:
Trend
Severity: Medium
Likelihood: Medium
Description and impact
Commentary for 2020
Mitigating actions
The pandemic has resulted in fewer
people choosing to use shared
modes of transportation, temporarily
halting the growth of shared mobility
solutions.
It is yet to be determined if this
change will be reversed once the
pandemic is addressed.
– Review of strategy in light of changing market
trends and alternative business models.
– Partnerships and pilot programmes with OEMs
and emerging mobility-service businesses to
better understand requirements and
propositions.
Technological advances have enabled the rapid
growth of on-demand and shared mobility
through the likes of Uber, Grab and Lyft.
The impact of these services will vary by market,
but provide both opportunity and threat to
existing business models and to the way vehicles
are distributed, retailed and used, particularly in
major cities and advanced city states.
A rapid growth in shared mobility, for example,
could reduce demand for new and used
vehicles. It could change the way vehicles are
distributed and purchased, potentially moving
from the current business-to-consumer model, to
more business-to-business transactions.
These changes may enable new entrants to
enter our markets with new business models.
P – Fraud, financial mis-statement
Risk level before mitigation:
Trend
Severity: Medium
Likelihood: Medium
Description and impact
Commentary for 2020
Mitigating actions
The Group may be subject to fraud or its financial
performance may be misstated, either in error or
deliberately.
These risks may be heightened during the
acquisition of new contracts in new markets; in
periods of organisational restructuring or
economic downturns; or when parts of the
business are under-performing against targets.
The effectiveness of some of our
financial controls (e.g. physical
stocktakes) were compromised
during 2020 due to the pandemic.
During the year, the Group refreshed
its system of internal financial
controls, realigning controls to the
areas of greatest risk of fraud or
mis-statement.
– Code of Conduct.
– ‘InControl’ framework of internal financial
controls, assessed quarterly and monitored by
management and the Audit Committee.
– Fraud Management and Whistleblowing policies.
– Delegation of Authorities policy.
– Cyber security programme.
– Whistleblowing hotline available in all countries.
– Internal Audit monitoring.
48
Inchcape Annual Report and Accounts 2020
Q – ‘Brexit’
Key
Climate change-related risk
Risk level before mitigation:
Severity: Low
Likelihood: Medium
Trend
NEW
Description and impact
Commentary for 2020
Mitigating actions
A change in the trading arrangements between
the UK and the European Union has the potential
to disrupt our business. This risk would be most
acutely felt had both sides failed to reach an
agreement on future trading arrangements. Our
exposure to this risk is in our UK Retail business
and our Northern Europe operation.
In the short term, the principal impact on the
Company relates to disruptions in the supply of
new vehicles and parts. The medium-term macro-
economic impact on the UK economy also
remains uncertain. A slowdown in economic
activity or a retrenchment of credit availability in
the UK would impact revenues and operating
margins in our UK Retail business (see Risk ‘M’).
In December 2020, the UK agreed
the basis for its future trading
arrangements with the EU. At that
point, the Group’s exposure to ‘Brexit’
risks reduced significantly.
Contingency plans had been
actioned in 2020 in anticipation of
any disruption. The Board is actively
monitoring developments and will
take further action as required.
Our analysis of the possible impacts
was reviewed throughout the year.
Action plans were implemented and
updated as negotiations progressed.
– Close liaison with OEMs to anticipate and
prepare for supply chain disruptions.
– Optimisation of inventory levels.
– In the UK and other markets, communicating
potential impacts to customers (e.g. delivery
delays and potential price rises).
– Close monitoring of the macro-economic
situation in the UK.
R – Electrification of the drivetrain
Risk level before mitigation:
Trend
Severity: Medium
Likelihood: Low
Description and impact
Commentary for 2020
Mitigating actions
In response to a changing climate, governments
around the world are increasingly committing to
phasing out fossil-fuel powered vehicles. This will
happen at different speeds in different markets.
A greater penetration of electric vehicles (“EVs”)
may reduce margins available through the value
chain, as OEMs, distributors and retailers make
additional investments in infrastructure.
We have long-standing relationships with our
OEM partners and rely on them to successfully
bring new EV models to market. Some of these
OEMs could fail to retain their current market
share if they offer an unattractive range of EV
products, impacting our performance.
The growth in EV sales has continued
in many markets in 2020, in spite of
the pandemic.
Governments continue to signal their
intentions to phase out petrol and
diesel vehicles. The UK government,
for example, has brought forward its
ban on new sales of those vehicles
to 2030.
We continued to bring market
insights to our OEM partners to inform
the planning, design and production
volumes for new models, to support
brand positioning and marketing.
S – Portfolio optimisation
– Review of our strategy in light of changing market
dynamics and new legislation.
– Ongoing collaboration with OEMs regarding
product design and planning, brand positioning
and marketing in the light of local market
requirements and characteristics.
– Preparation of Aftersales business in line with OEM
EV requirements.
Risk level before mitigation:
Trend
Severity: Medium
Likelihood: Low
Description and impact
Commentary for 2020
Mitigating actions
As a global retailer we hold a significant portfolio
of operational Retail assets. We acknowledge
that the risk inherent in holding Retail-only assets
is increasing. Our ongoing portfolio strategy is
therefore focused on more attractive and less
capital-intensive Distribution operations. Failure to
dispose of Retail assets when maximum value
creation has been achieved, or before
anticipated internal or external factors lead to a
sustained underperformance, may lead to
inefficiency and impact on profit.
We have continued to expand our
Distribution footprint in 2020,
acquiring contracts in South America
and Europe. We continue to dispose
of Retail assets when maximum value
can be achieved.
– Continual monitoring of portfolio and disposal of
assets where necessary.
– Regular impairment reviews undertaken.
– Disposal of non-strategic, higher risk Retail assets
in progress.
Inchcape Annual Report and Accounts 2020
49
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Risk management continued
Viability of Inchcape plc
Three-year assessment period
The Directors have assessed the viability of the Group over a three-year period to December 2023, taking account of the Group’s
current financial position and the potential impact of our most material principal risks (or a combination of them). The Directors
have determined three years to be the most appropriate period for the viability assessment. Our continued viability is dependent
upon the continuation of our relationships with OEMs and many of our OEM contracts have terms of less than three years; three
years is a key timeline for new car changeover in mature retail markets with good personal finance penetration; and the number
of Units in Operation (UIO) up to three years old is a key driver of our Aftersales business.
Process and scenarios considered
Our financial planning process incorporates an Annual Operating Plan (“AOP”) for the next financial year (2021), together with
financial forecasts for the remaining years covered by the Viability Assessment. These financial forecasts consider the Group’s
profitability, gearing, cash flows and other key financial metrics over the period to December 2023. These metrics are subjected to
sensitivity analysis, in which a number of the main underlying assumptions are adjusted and tested to consider alternative risk-based
scenarios. Using the Group’s four most significant risks, unlikely but realistic worst-case scenarios are created and their impact
projected onto the three-year projections. These risks are (i) loss of a material Distribution contract, (ii) continued and more severe
incidence of the current pandemic, (iii) a major cyber incident and (iv) digital disruption to our markets and pricing. These risks
have been modelled individually and concurrently, i.e. assuming all four materialise during the three-year period. Modelling these
risks tests the Group’s ability to withstand a material reduction in revenue (Distribution contract and COVID risks); a material
degradation in margins (digital disruption); and the impact of an unexpected operational expense (cyber attack).
The models assume that a portion of our uncommitted facilities (inventory financing) are withdrawn. The testing recognises that
some mitigating actions would remain available to management to partially mitigate the impact of these risks, including reductions
in operational and capital expenditure.
In the most severe scenario modelled, the test indicates that the Company would not breach the single financial (interest)
covenant on its committed facilities. Details of the Company’s financing arrangements can be found in note 23 to the financial
statements on pages 159-160.
Viability statement
Based on the outcomes of the scenarios and considering the Group’s financial position and principal risks, the Directors 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. The Directors’ statement regarding the adoption of the going concern basis for the preparation of the financial
statements can be found on page 100.
UK trading arrangements with the European Union (‘Brexit’)
In late December 2020, the UK agreed the basis for its future trading
arrangements with the European Union. At that point, the Group’s
exposure to ‘Brexit’ risks reduced significantly. The risk is still displayed on
the heatmap of principal risks, as it had remained a material risk up to
23 December – the date on which an agreement was announced.
Any remaining exposure is not considered material and relates
principally to our UK Retail business, where we are the retailer for major
German brands. We also import certain Toyota and JLR models from the
UK into Europe. In the short term, any impact on the Company relates to
disruptions in the supply of new vehicles and parts, which we believe is
manageable. Given the nature of our business, we are reliant upon the
actions taken by our OEM partners in response to any disruption and we
continue to work closely with them. The medium-term macro-economic
impact on the UK economy also remains uncertain. A slowdown in
economic activity or a retrenchment of credit availability in the UK would
impact our UK Retail business.
Contingency plans were implemented in 2020 and in 2021 in
anticipation of any disruption. The Board is actively monitoring
developments and will take further action as required.
50
Inchcape Annual Report and Accounts 2020
Directors’ approval
of the Strategic Report
Our 2020 Strategic Report, from pages 1-51,
has been reviewed and approved by the
Board of Directors on 24 February 2021.
Duncan Tait
Group Chief Executive
VW Group
Inchcape has a retail-only partnership with VW Group and
represents the core VW and Audi brands as well as the
performance marque Porsche. Our VW Group relationship
extends to over 30 years and we are present today as a
Retail operator in the UK and Russia.
Locations
Retail
UK, Russia
Inchcape Annual Report and Accounts 2020
51
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Chairman’s statement
A governance culture
Nigel Stein
Chairman
Dear Shareholder
I am pleased to present the Corporate
Governance Report for the year ended
31 December 2020. The next few sections
explain how the Board and its Committees
have discharged their duties throughout the
year and I hope you find it informative.
COVID-19 began impacting the Group at the beginning of
2020, forcing the closure of businesses in several markets.
The Board met regularly during March, April and May to assess
the quickly evolving situation. The immediate focus was on the
health and safety of our employees and customers and to
protect the strength of the balance sheet. Further information
on the Board’s decisions as a response to COVID-19 are given
on page 53.
The management teams adapted quickly, creating a global
COVID-19 taskforce, holding weekly business review calls, and
implementing stock management key controls and a set of
safe-operating practices for all markets which remained open.
Regular meetings with OEM brand partners were held to ensure
optimal vehicle allocation to support both their businesses and
our own during this challenging time. Employee wellbeing
programmes were put in place and more frequent
communication processes were implemented to ensure
that our employees remained updated at all times.
The Board also needed to change the way it carried out
meetings which were all held virtually from March onwards.
More meetings were held to monitor the situation and agendas
were considered carefully to ensure that there was sufficient
time to deal with all the issues as they arose. The Board
members have given their time generously during the year
and I would like to thank them for their support.
Both the Board and the CSR Committee regularly monitored the
number of COVID-19 cases impacting our employees, all of
which we believe were contracted outside the workplace,
52
Inchcape Annual Report and Accounts 2020
which sadly resulted in five deaths during 2020. Our sincere
condolences go to their families and the Group has offered
every support to assist them at this very difficult time.
Board changes
Duncan Tait joined the Group as Chief Executive Officer in
June 2020 and I am confident that he has the necessary skills
and experience to lead the Group into the future. Please see
Duncan’s review on pages 4 to 6. As mentioned last year,
Alex Jensen joined the Board as a Non-Executive Director in
January 2020 and was appointed as the Chair of the CSR
Committee with effect from 1 January 2021 and I am sure
her experience at bp plc will add insight to the
Committee’s discussion.
Till Vestring completed nine years on the Board during 2020
and had planned to stand down at the AGM in May however,
Till has agreed to extend his tenure until we have successfully
appointed and inducted a new Non-Executive Director onto
the Board. See page 56 for statement of code compliance.
It is also with regret that Rachel Empey will leave the Board in
April 2021 due to other commitments. I would like to thank
Rachel for her strong contribution and the sound advice she
has provided since she joined in May 2016 and I wish her all
the best for the future.
Climate change
As an automotive distributor and retailer, climate change
will impact the business in the future and is considered within
the broader discussions on strategy, risks and opportunities.
As noted in my letter on pages 2 and 3, the Board reviews the
major disruptive trends affecting the global automotive industry
which includes those emerging as a result of climate change.
Climate-related issues are considered under some of our
principal risks and our best estimates are made on the
impacts to the business; further details can be found on
pages 42 to 49.
The Financial Reporting Council published a climate
thematic in November 2020 noting that UK businesses
needed to improve reporting in this area and with the
introduction of mandatory reporting in line with the Task Force
on Climate-related Financial Disclosures (”TCFD”), the Board
has appointed The Carbon Trust to assist the Group in
improving its disclosures in line with the recommendations
as set out in the TCFD, during 2021.
Brexit
The Group’s exposure to Brexit is principally in our UK Retail
business where we are retailer for major German brands and
also where we manufacture in the UK for export to EU countries.
Engagement with our OEM brand partners is key to working
closely with them to mitigate disruption. In the medium term,
contingency plans have been implemented and the Board
will monitor developments and take further action as required
throughout 2021. Further details are given in the Risk Report
on page 50.
Looking forward
2020 was a challenging year, and I would like to once again
thank our people for their resilience throughout such difficult
times. The Board and I look forward to our continuing recovery
and success in 2021 and beyond as we move forward with our
strategy for growth.
I thank you for your support during 2020 and look forward to
the coming year.
Nigel Stein
Chairman
COVID-19
The Board had to make several difficult decisions to support
the business as the pandemic took hold around the world.
The Board had regard for the interests of the Group’s
stakeholders during the decision-making process and
weighed up the adverse impacts of some of those
decisions with the continued success of the business
during such unprecedented times. At the beginning of the
pandemic the focus was on liquidity and short-term cost
savings and as the year progressed the Board’s focus was
on preparing the business for returning to structural
profitability and for further potential disruption.
The Board announced a £150m share buyback in February
2020, £30m of which was completed by March. As soon as it
became apparent that businesses would be forced to close
the Board made the decision to cancel the buyback to
preserve cash in the short term. A final dividend had also
been proposed which would have been payable in June
2020. The Board closely monitored the rapidly evolving
situation but it soon become clear that the closures would
last longer than anyone had hoped. The Board decided to
withdraw the dividend in April 2020 to further preserve cash.
Further details can be found on page 60.
As markets shut under government lockdowns approx. 60%
of the workforce were placed on furlough and a further 40%
were working remotely. In order to support employees who
were unable to work during this time, the Group utilised
government sponsored furlough schemes in the UK,
Australia and Singapore. Where government support was
not available or was provided at a low-level, salaries of
furloughed staff were topped up to an average of 50% of
salary, which was necessary in a number of markets to
prevent redundancy situations. The situation was monitored
on a market-by-market basis to ensure the solutions were
fair, competitive and affordable against a continually
evolving landscape. In addition, the following cost-saving
measures were introduced:
– a 20% reduction in salary for senior executives;
– a 20% reduction in fees for Board members;
– a salary freeze for some employees.
In April, the Board decided to apply for temporary
borrowing under the UK Covid Credit Financing Facility
programme as the duration of the global lockdowns
was still uncertain at that time. Of the funding secured
by the Group £100m was drawn down in May, but as
the financial impacts became clearer the Group was
able to repay the funding in July.
The regional management teams engaged with our
OEM brand partners to materially cut production
orders and negotiate extended payment terms. These
actions together with supplier related credit extensions
secured with the Group’s financial partners further
strengthened the Group’s position. The successful
outcomes were driven by the constructive partnership
approach the management teams and our OEM
partners have taken during this time.
Despite the actions above, the continued COVID crisis
impacted the business significantly during the first half
of 2020 and the outlook was uncertain. In planning for
the future of the Group, the Board approved a cost
restructuring programme to ensure the Group was
able to remain agile in the medium and longer term.
Reflecting how material employee costs are on the
business, and the expected lower demand in 2021,
the Board made the difficult decision to approve
redundancies of circa 10% of employees across the
Group. In addition, the reduction of the Retail footprint
was accelerated to reduce overheads further. The
restructuring programme was significant and the
Board considered detailed plans orchestrated by the
regions and Group Executive Team when making its
decisions. Key to achieving the desired outcomes
was continuing the strong relationships built up with
local unions and consultation groups, and with our
OEM partners who have remained fully supportive
throughout the process. Overall the cost
restructuring programme is expected to deliver a
cost benefit of £90m of which 50% will be retained
when revenue recovers.
Inchcape Annual Report and Accounts 2020
53
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate governance report – Board leadership and company purpose
Board of Directors
The Board is collectively responsible for agreeing, developing, and continually reviewing the strategy
to ensure that it delivers long-term sustainable success. The Board is also responsible for ensuring that
the appropriate people are employed to deliver the strategic objectives and that they have adequate
financial resources in order to do so. Underpinning this, the Board must ensure that there is the right
development and training in place to support the strategy, along with the necessary controls, processes
and procedures to drive a strong ethical culture to facilitate the delivery of the strategic goals.
Nigel Stein
Duncan Tait
Gijsbert de Zoeten
Jerry Buhlmann
Rachel Empey
Jane Kingston
John Langston
Till Vestring
Alex Jensen
FULL BIOGRAPHIES, INCLUDING PAST EMPLOYMENT HISTORY, CAN BE FOUND ON WWW.INCHCAPE.COM
54
Inchcape Annual Report and Accounts 2020
Nigel Stein
Chairman
Appointed
October 2015
Duncan Tait
Chief Executive Officer
Gijsbert de Zoeten
Chief Financial Officer
Jerry Buhlmann
Non-Executive Director
Appointed
July 2020
Appointed
August 2019
Appointed
March 2017
Skills and experience
Nigel was Chief Executive of
GKN plc until his retirement in
December 2017. He has a
wide range of international,
general management and
finance experience gained in
various roles at GKN plc and
also has experience in the
automotive and
manufacturing sectors.
Nigel is a chartered
accountant.
Committee membership
Chair of the Nomination
Committee and member of
the Remuneration and CSR
Committees.
Skills and experience
Duncan was on the Board of
Fijitsu Ltd, a global
technology services
company with responsibility
for EMEIA & Americas, a
business with $10bn turnover
and 35,000 people. He has
significant international
experience, holding senior
roles at Unisys, Hewlett
Packard and Compaq in a
technology focused career
of over 30 years.
Other appointments
Duncan is also non-executive
director at Agilisys.
Skills and experience
Gijsbert was CFO at
LeasePlan Corporation NV,
the international fleet
management and mobility
services company.
Previously, Gijsbert has held a
range of senior financial and
operational roles at Unilever
plc over 27 years, including
his six-year position as the
CFO of Unilever Europe.
Other appointments
Gijsbert is also a member of
the supervisory board of
Technical University Delft.
Skills and experience
Jerry has over 30 years’
experience in the media and
advertising industries. He was
CEO of Dentsu Aegis Network
from 2013 until 2018. Prior to
its acquisition by Dentsu Inc,
Jerry was the CEO of Aegis
Group PLC.
Jerry is also Non-Executive
Chairman of Croud, a
director of Tulchan Limited
and Senior Advisor for
OC&C’s TMT Practice.
Committee membership
Audit, Remuneration, CSR
and Nomination
Committees.
Rachel Empey
Non-Executive Director
Jane Kingston
Non-Executive Director
John Langston
Non-Executive Director
Till Vestring
Non-Executive Director
Alex Jensen
Non-Executive Director
Appointed
May 2016
Appointed
July 2018
Appointed
August 2013
Appointed
September 2011
Appointed
January 2020
Skills and experience
Rachel was appointed
Chief Financial Officer
of Fresenius SE & Co.
KGaA, a top
healthcare company
listed on the DAX
index, in August 2017.
Previously Rachel was
Chief Financial and
Strategy Officer of
Telefónica
Deutschland Holding
AG.
Rachel is a chartered
accountant.
Committee
membership
Audit and Nomination
Committees.
Skills and experience
Jane served as Group
Human Resources
Director for Compass
Group PLC
from 2006 until her
retirement in 2016.
Jane also held
senior positions at
Enodis PLC, Blue Circle
PLC (now Lafarge SA)
and Coats Viyella PLC.
Jane has significant
remuneration
experience and is
Remuneration
Committee Chair of
Spirax-Sarco
Engineering plc.
Committee
membership
Chair of Remuneration
Committee and
member of
Nomination
Committee.
Skills and experience
John has corporate
finance, accounting
and international
experience acquired
in senior financial roles
in the engineering
sector. He is an
experienced Non-
Executive Director who
has a strong
governance
background and was
the Audit Committee
Chair of Rexam PLC
until its sale to
Ball Group in 2016.
John is a chartered
accountant.
Committee
membership
Chair of Audit
Committee and
member of
Nomination
Committee.
Skills and experience
Till is an Advisory
Partner with
Bain & Co, based in
Singapore. He has
extensive experience
advising
multinationals on
growth strategy across
Asia and leading
Asian companies on
strategy, M&A and
organisation.
Till is also a Non-
Executive Director of
Keppel Corporation.
Committee
membership
Chair of CSR
Committee
and member of
Remuneration and
Nomination
Committees.
Skills and experience
Alex is currently CEO
Mobility and
Convenience, Europe
and Southern Africa at
bp plc. She leads the
region’s fleet, retail
and convenience
food business across
14 countries.
Alex joined bp plc in
1991 and held roles
based in the UK and
China. She graduated
from Oxford University
with a degree in
Chinese, holds a
Masters from Stanford
and is on the Board of
the charity Mind.
Committee
membership
Nomination and CSR
Committees.
Inchcape Annual Report and Accounts 2020
55
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate governance report – Board leadership and company purpose continued
Compliance with the 2018 UK Corporate
Governance Code
The 2020 report has been structured in
accordance with the 2018 UK Corporate
Governance Code and details how we have applied
the principles accordingly:
Board leadership and company purpose
54
56
58
59
18
Board of Directors
Purpose and strategy
Governance structure
Board activities
Engagement with stakeholders
Division of responsibilities
61
Roles of the Board
Composition, succession and evaluation
Nomination Committee Report
62
Board evaluation
64
Audit, risk and internal control
Audit Committee Report
65
Remuneration
74
77
78
85
Directors’ Report on Remuneration
Remuneration at a glance
Directors’ remuneration policy
Annual Report on Remuneration
Statement of Code compliance
The Company complied with the provisions
of the 2018 UK Corporate Governance Code
throughout the year.
Under Code provision 5, the Company has appointed
the CSR Committee chair as the designated non-
executive director with responsibility for engagement
with the workforce. Unfortunately, some of the planned
engagement was not able to be carried out in 2020
due to travel restrictions however a programme of
engagement has been planned for 2021. Further
details are on page 73.
Under Code provision 10, the criteria for
independence is set out. Till Vestring has been on the
Board for over nine years which is considered a
circumstance which could impair independence.
However the Board is satisfied that Till continues to
have independent character and judgement despite
the length of time served.
THE CODE CAN BE FOUND ON THE FRC’S WEBSITE
WWW.FRC.ORG.UK
THE INFORMATION REQUIRED UNDER DTR 7 IS GIVEN
ON PAGES 52 TO 100 AND FORMS PART OF THIS REPORT
Purpose and strategy
On joining in June 2020, Duncan Tait reviewed the strategic
direction as the Group embarks on the next phase of its
journey. Working with Duncan and the Group Executive Team,
the Board sought to establish a clear articulation of what
drives Inchcape and reflects our stakeholder commitments.
The Group’s purpose ‘Bringing mobility to the world’s
communities – for today, for tomorrow and for the better’,
encompasses who we are, what shapes our decisions and
the future direction of the business.
The strategy is designed to create long-term sustainable
success for all our stakeholders by delivering financial returns
to shareholders, a robust route to market for our OEM brand
partners, fulfilling careers for our people, trusted vehicles sales
and aftersales for our customers and contribute to wider
society by offering valued employment opportunities, an
established distribution network and an ethical business.
The process of implementation planning and developing
commercial objectives under the refreshed strategy will
continue during 2021.
The Group’s purpose, strategy and business model are set out
on pages 8 to 16 of the Strategic Report. The principal risks and
uncertainties which could impact the delivery of the Group’s
strategy and therefore the long-term success are given on
pages 41 to 50.
System of risk management and internal control
The Group has a solid controls platform from which to manage
the business in an effective and efficient way, with a control
environment which can help identify and address emerging
risks as they arise. Further details of the refreshed InControls
framework is given on page 69 The Board believes it addresses
the requirements of the current UK Corporate Governance
Code through the maintenance and continuous improvement
of the Group’s risk management framework. This includes:
– established planning, budgeting and forecasting cycles,
including the approval of the Strategic Plan by the Board;
– Board consideration of the principal risks relating to that
Strategic Plan;
– reviews by the Group Executive Team of the Group’s principal
risks and agreement as to their management (incorporating
risks identified by the Board);
– reviews by the Audit Committee of the management of
principal risks;
– an annual effectiveness review by the Audit Committee of
the Group’s system of risk management and internal control;
– ownership of the risk management programme by the Group
Executive, facilitated by the Chief Financial Officer;
– dedicated resource: a Group Head of Internal Audit and
Group Risk Manager to lead and continuously improve risk
management;
– a network of risk champions across the Group’s regions
and markets;
– a Group risk management policy, along with other Group-
wide policies and procedures to address selected key risks;
– definition of the level of risk the Company is willing to take
(‘risk appetite’) through the use of structured risk rating scales
and qualitative statements;
56
Inchcape Annual Report and Accounts 2020
Culture
In order to operate effectively, it is important that the
appropriate culture is embedded throughout the business and
this is approached in several ways:
– The Code of Conduct outlines the behaviours expected of
employees. All new employees receive training on the Code
of Conduct within the first month of joining the business.
– The whistleblowing line enables employees to report anything
that they feel is inappropriate and the Audit Committee
reviews reports made to the line at each meeting.
– Remuneration policies and practices are designed to
promote the right behaviour. The work of the Remuneration
Committee looks at all elements of the remuneration
structure to ensure that this ethos is being carried out across
the Group and focus is given to appropriate target setting
and performance achievement. Further information can be
found on pages 74 to 95.
– Setting an appropriate AOP and monitoring performance
against targets throughout the year to ensure that undue
pressure is not being placed on employees to behave in
inappropriate ways to achieve results.
– Employee survey carried out regularly to understand the
thoughts and views of employees.
– Delegated authorities at Group and local level sets out the
responsibilities of management in decision making.
– Policies, practices and controls designed to drive the right
behaviours.
Concerns on Board operations
If a Director has a concern about the running of the Company
which cannot be resolved, it would be recorded in the Board
minutes. No such concerns arose in 2020.
– a six-monthly risk assessment, action planning and
reporting cycle;
– a standardised, mandatory control framework (InControl)
to address key areas of operational risk;
– periodic self-certifications of compliance with Group policies;
– reviews of operating companies’ risk mitigation actions by
the Group Risk Manager and other Group functions;
– periodic reports to senior management of the status of
individual risks and their mitigation;
– an Internal Audit function, which is independent of
business unit management and whose audit plans are
informed by the Group’s principal risks.The Board carries out
a robust assessment of principal and emerging risks, which
include those that would threaten the business model,
future performance, solvency and liquidity, and is responsible
for reviewing and agreeing the Group’s principal risks and
for considering its risk appetite in relation to those risks.
Each risk is considered in the context of the strategy with a
focus on:
– The description of the risk;
– The current risk footprint showing gross risk, net risk and
the target position;
– Background information that underpins the risk;
– Key mitigation actions; and
– The risk appetite statement for each of the risks.
The risk management and internal controls processes are
designed to manage rather than eliminate the risk of failure to
achieve business objectives. In establishing and reviewing the
system of internal control, the Directors have regard to
the nature and extent of the relevant risks, the likelihood of loss
being incurred and the costs of control. The system can only
provide a reasonable but not absolute assurance against
any material mis-statement or loss and cannot eliminate
business risk.
The Board has determined that there were no significant
failings or weaknesses identified during the review of the risk
management and internal control processes during the year
and further confirms that these systems were in place during
2020 and up to the date of this report. The Directors are satisfied
that the Group’s risk management and internal control systems
accord with the FRC’s Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting. Further
information is given in the Audit Committee Report on pages 65
to 71 and the Risk Report on pages 41 to 50.
Inchcape Annual Report and Accounts 2020
57
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate governance report – Board leadership and company purpose continued
Meetings held during 2020
The table below shows the Board and Committee meetings held during the year. The Board held an additional four ad hoc
meetings during 2020. Further details on ad hoc Committee meetings held are given in the committee reports.
Board
Audit Committee
Remuneration Committee
Nomination Committee
CSR Committee
Scheduled/Attended
Scheduled/Attended
Scheduled/Attended
Scheduled/Attended
Scheduled/Attended
Stefan Bomhard*
Jerry Buhlmann
Gijsbert de Zoeten
Rachel Empey
Alex Jensen
Jane Kingston
John Langston
Nigel Stein
Duncan Tait*
Till Vestring
3/3
7/7
7/7
7/7
7/7
7/7
7/7
7/7
4/4
7/7
4/4
4/4
4/4
2/2
2/2
2/2
2/2
2/2
2/1
2/2
2/2
2/2
2/2
2/2
1/1
2/2
1/1
2/2
1/1
2/2
* Duncan Tait joined the Group on 1 June 2020 and Stefan Bomhard left the Group on 30 June 2020.
Governance structure
The Board of Inchcape plc
Collectively responsible for the long-term success of the Company
Audit
Committee
Remuneration
Committee
Group Executive
Team
Nomination
Committee
CSR
Committee
Delegated
authorities:
Delegated
authorities:
Delegated
authorities:
Delegated
authorities:
Delegated
authorities:
Financial Reporting
Remuneration Policy
Group Strategy
Board Composition
CSR Strategy
Risk Management
Incentive Plans
Internal Control
Performance Targets
Operational
Management
Diversity
Succession Planning
Workforce
Engagement
COMMITTEE REPORT
COMMITTEE REPORT
COMMITTEE REPORT
COMMITTEE REPORT
PAGE 65
PAGE 74
PAGE 62
PAGE 72
Delegated
authorities:
Risk oversight
Minimum Control
Framework
Risk
Committee
Investment
Committee
Delegated
authorities:
Oversight of Group
capital expenditure
58
Inchcape Annual Report and Accounts 2020
The Chairman ensures that there is a culture of openness and transparency on the Board to facilitate constructive debate on all
matters considered during the year. The Directors provide feedback on how the Board operates, its culture and effectiveness during
the evaluation process. The formal schedule of Matters Reserved for the Board can be found at www.inchcape.com/governance.
Objective in 2020
Response to COVID-19
What we achieved
The Board held several ad hoc meetings to monitor the
impact of COVID-19 on the Group’s businesses. The Board
spent time assessing:
Focus for 2021
The Board will continue to
monitor the impact of the
pandemic throughout 2021
Strategy
Risk
Financial reporting and
business performance
Leadership
Governance and culture
– Health & safety of employees and customers
– OEM brand partners and supply issues
– CCFF and government support programmes
– Dividend and share buyback
– Financial scenarios and liquidity
– Cost restructuring programme
Regional updates were given throughout the year covering
the UK, Europe, Australasia, the Americas and Africa
Expanded representation of Daimler in the Americas, secured
distribution rights for MINI in Chile and MINI and BMW
Motorrad in Peru, agreed a distribution JV with JLR in Poland
Successful disposal of a number of UK dealerships as part of
the Retail optimisation programme
The Board undertook a review of its risks this year and
identified two new emerging risks: change programmes and
margin pressure
The Board also considered the impact of climate change
and Brexit. Further details are given in the Risk Management
Report on pages 41 to 50
The Board held a number of ad hoc meetings to consider the
impact of COVID-19 on the Group’s trading performance and
to assess whether the Group had sufficient financial resources
to navigate the disruption
The Board spent additional time assessing whether the Group
would be able to report its financial results within the usual
timescales given the continued disruption and the challenges
presented by remote working
The Board reviewed the Organisational Health Check for 2020
to assess the global talent review, performance and potential,
succession planning, diversity and leadership development
The Board successfully appointed a new Chief Executive
Officer, Non-Executive Director and approved the
appointment of four new members of the Group Executive
Team during 2020
An external Board evaluation was carried out in 2020. Further
details can be found on page 64
The Board received a governance update from external
advisors during the year which focused on developments in
the Corporate Governance landscape including sustainability
and climate-related matters, listing regime update, diversity
and audit reform
The Board carried out a review of the Group’s Environment,
Health & Safety programmes during the year with additional
focus on the measures in place to protect employees and
customers during the pandemic. Further information can be
found on page 36
Approval of refreshed strategy
Global industry and market
trends
Disruptive and future trends
Impact of climate change on
business model and value
chain
Annual review of principal risks
and mitigating actions
Annual review of risk appetite
Review of climate-related risks
and opportunities
Approval of annual operating
plan
Review of delegated authorities
policy and capital expenditure
processes
Review of action plans to drive
performance, transform
diversity, realise potential and
retain critical talent
Compliance with the
recommendations of the Task
Force on Climate-related
Financial Disclosures
Inchcape Annual Report and Accounts 2020
59
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate governance report – Board leadership and company purpose continued
Section 172 case studies
Cancellation of dividend
The Board closely monitored the rapidly evolving COVID-19 situation in its markets with the safety of our employees and
customers of paramount importance during this time. Swift action was taken to protect the balance sheet in such uncertain
times including immediate cancellation of the buyback, reducing costs, 20% salary/fee reduction for senior management
and the Board, temporary salary increase freeze, utilising government support, reducing stock and extending credit terms.
It was in this context of cash preservation in the short term that the Board made the decision to withdraw the
recommendation to pay the final dividend for the year ended 31 December 2019. The Board had regard to the impact this
would have on shareholders, many of whom rely on income from company dividends. However it was felt that it was the
correct decision during such unprecedented times. The Board also had regard for some shareholders’ views on paying a
bonus to employees whilst cancelling a dividend. The bonus had already been paid to employees by this time and the
Remuneration Committee did not feel it would be appropriate to operate clawback, with the high likelihood that employees
would not receive a bonus for 2020, and the Board’s intention was to resume the payment of dividends as soon as possible
ensuring the impact to shareholders was short term. Details of the proposed dividend for the year ended 31 December 2020
are given on page 96.
Change in pension scheme
The Board was required to consider and make a decision on the current UK pension scheme. As part of the decision making
process the Board compared the pension arrangements of its competitors, OEM brand partners and other UK listed
companies. The Company undertook a comprehensive consultation process and due to COVID-19, additional steps were
taken to ensure all affected employees could fully engage in the process. The consultation process included the following
measures:
– Consultation with pension trustees
– A consultation email inbox was set up, through which employees provided feedback
– An informal group of employee representatives, the Employee Feedback Group (“EFG”) was assembled to give affected
employees another way in which they could engage in the consultation process
– A detailed briefing session was held for the members of the EFG to address their questions on the proposed changes
– A series of 10 online information sessions during the consultation period which were open to all affected employees
A total of 68 points were raised for consideration by the Company and approx. 150 employees joined the online briefing
sessions. All questions raised were addressed at a mid-consultation update. This engagement ensured that the Board
understood the views of the UK pension members and other relevant stakeholders when making its decision. The Board
concluded that the new arrangement would be a benefit to the Company by reducing volatility and costs and would be
simpler to understand and give increased flexibility to employees. After considering all the factors, the Board decided to
close the previous pension scheme with effect from 31 December 2020 and the new scheme was introduced with effect
from 1 January 2021. Ensuring that employees are able to save sufficiently towards their income in retirement and that the
new pension offering was fair were key factors in the Board’s decision making.
Climate change and TCFD
The impact of climate change on the Group is considered in general terms as it is intrinsically linked to various risks and
opportunities impacting the automotive industry and therefore the Group’s business model and value chain and to date our
best estimates have been used to judge those impacts. Further information is given in the Risk Management Report on page
43 and in the Financial Statements on pages 125 and 146. During the year investors have begun asking companies how
they are considering climate change and this interest, along with guidance from the proxy advisors and the publication of
the Financial Reporting Council’s climate-related thematic issued in November 2020, the Board will consider the risks and
opportunities in further detail. The Board agreed that the impacts of climate change will affect all of the Group’s stakeholders
in the longer term therefore it is imperative that the Board fully understands the impact of climate change to the Group. The
Board’s decisions include:
– Ensuring the Group’s strategy fully encompasses the risks and opportunities presented by climate change
– Update the Matters Reserved for the Board to ensure oversight of climate-related matters is considered at Board level
– Appoint The Carbon Trust to assist the Company with its disclosures under the recommendation set out under the Task
Force on Climate-related Financial Disclosures.
60
Inchcape Annual Report and Accounts 2020
Corporate governance report – Division of responsibilities
Roles of the Board
Nigel Stein
Chairman
Jerry Buhlmann
Senior Independent Director
Duncan Tait
Group Chief Executive Officer
Duncan Tait, as Group Chief Executive
Officer, is responsible for developing the
Group’s strategy, running the day-to-day
operations, reporting to the Board on
performance, implementation of strategy
and any significant developments,
leading the Group Executive Team
including managing risk and internal
control and engaging with shareholders.
As Chairman, Nigel Stein sets the Board’s
strategic agenda which covers routine
items, strategic priorities and ad hoc
matters as they arise. Most Board
meetings in 2020 were held via video
conference, and at the beginning of the
year many were called on short notice.
A key priority has been ensuring the
meetings are focused on the decisions
which need to be taken, that each
Board member has opportunity to
express their views, that the supporting
papers contain the detail required for
effective decision making and that the
Directors are aware of their
responsibilities. Time is set aside for the
Chairman and Board members to
communicate outside of the Boardroom.
Nigel Stein was considered independent
upon appointment.
As Senior Independent Director (”SID”),
Jerry Buhlmann acts as a sounding
board for the Chairman, to serve as an
intermediary to other members of the
Board and is available to shareholders if
they do not want to speak to the
Chairman or the Group Chief Executive
Officer. Jerry leads the annual Non-
Executive Director only meeting during
which they appraise the performance of
the Chairman.
During the year, Jerry and Nigel worked
together to ensure a seamless transition
of CEO and to support Duncan in his
new role.
Non-Executive Directors
The Non-Executive Directors are appointed to offer a wide range of skills and experience which enable them to advise, support and
constructively challenge management, and to provide strategic guidance and independent judgement on the Board’s
discussions. Explanatory notes on their contribution to the business are given in the Notice of Meeting for the 2020 Annual General
Meeting (”AGM”) to accompany the resolution to re-appoint each Director. All Non-Executive Directors are considered independent
in accordance with the UK Corporate Governance Code. None of the Directors or their connected persons have, or have had, a
material relationship with the Company and its subsidiaries. Non-Executive Directors receive a fee only and do not participate in
share award schemes or the pension scheme. There are no cross directorships. The Non-Executive Directors’ letters of appointment
are available for inspection at the Company’s registered office and at the AGM.
Till Vestring joined the Board in September 2011 and has been a member of the Board for just over nine years. Due to the challenges
of recruiting Non-Executive Directors during the pandemic, Till has agreed to remain with the Board to assist with the recruitment and
induction of two new Non-Executive Directors during 2021. His experience on the Board and knowledge of the Asia region have
been of invaluable assistance to both Duncan Tait and Alex Jensen who joined during 2020 and will support the new Directors
when they join the Board.
The Non-Executive Directors are required to allocate sufficient time to the Company to discharge their responsibilities and Board
dates are agreed two years in advance to ensure that Directors are able to plan accordingly and for other commitments to be
taken into account. Non-Executive Directors are informed of the time commitment expected from them upon appointment and this
is reviewed annually to ensure that the time expected is still relevant in light of the Company’s strategic agenda. The Board’s policy
on multi-board appointments requires Directors to obtain prior approval from the Nomination Committee and the Board before
taking on another directorship.
Executive Directors
The Board understands that the Executive Directors can gain valuable business experience as a Non-Executive Director of another
company. The Board’s policy is to limit non-executive directorships within a FTSE 100 company to one appointment only. The policy
requires Directors to obtain prior approval from the Nomination Committee and the Board before taking on another directorship.
The Group Company Secretary supports the Board by providing advice, including access to independent advice, and ensuring
that the Board has the appropriate policies, information, time and resources in order to function effectively.
Inchcape Annual Report and Accounts 2020
61
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate governance report – Composition, succession and evaluation
Nomination Committee report
Nigel Stein
Chair of Nomination
Committee
Dear Shareholder
I am pleased to present the report of the
Nomination Committee for the year ended
31 December 2020.
During the first few months of 2020, the
Committee’s focus was on the recruitment of a
new Group Chief Executive and I am delighted
that Duncan Tait joined the business on 1 June.
Committee members and attendance at meetings
Scheduled / attended
Ad hoc meetings
Nigel Stein – Chair
Jerry Buhlmann
Rachel Empey*
Alex Jensen
Jane Kingston
John Langston
Till Vestring
2/2
2/2
2/1
2/2
2/2
2/2
2/2
4/4
4/4
4/4
4/4
4/4
4/4
4/4
* Rachel Empey was unable to attend the meeting in November due to a prior
commitment.
Allocation of time spent
Succession planning
Board composition
Corporate governance
62
Inchcape Annual Report and Accounts 2020
As noted last year, Alex Jensen joined as a Non-Executive
Director in January 2020 and was appointed as Chair of the
CSR Committee in January 2021. Her experience as a senior
executive at bp plc adds insight and knowledge to the
Committee’s discussions as the Group continues its
ESG journey.
Duncan and Alex both faced the additional challenge of
having remote inductions due to lockdown restrictions, with
face to face meetings and site visits severely restricted. During
2020, Duncan was able to visit the Group’s operations in the UK,
Belgium and Greece, making sure that all government
guidelines relating to COVID-19 and travel were adhered to.
When appointing new Directors, the Committee considers the
longer-term strategy and the skills needed to help deliver this
successfully. In addition, the Committee considers breadth of
perspective on the Board which is achieved by appointing
Directors from a diverse range of backgrounds, with knowledge
and skills relevant to the Group’s strategic direction in the
longer term. The appointment of a CEO is crucial for an
organisation and the Board spent time considering what skill
set would be appropriate for the business during times of
unprecedented changes in the automotive industry and, as
noted in previous Annual Reports, with digital expertise as a key
priority. We believe that Duncan’s digital experience with Fujitsu
will be invaluable in the delivering the future strategy of
Inchcape. When recruiting for a pivotal role such as CEO, it is
also important that personal attributes are taken into
consideration and the Board believes that Duncan possesses
traits which strongly support our values and will allow him to
make a positive contribution to the business.
As noted on page 61, Till Vestring completed nine years’ service
in 2020. The Committee felt that it is important to maintain
continuity in what has been a year of significant change and
Till has kindly agreed to stay on the Board to assist with the
recruitment and induction of new Non-Executive Directors
during the year. The Committee is satisfied that despite having
over nine years on the Board, Till remains independent as he
meets the remaining independence criteria as set out in the UK
Corporate Governance Code and continues to demonstrate
independent character, judgement and objectivity.
In February 2021, it was announced that Rachel Empey has
also decided to step down from the Board and will leave in
April 2021. The focus for the Committee in early 2021 will be
the appointment of two new Non-Executive Directors to fill the
vacancies which will be left by Till and Rachel, and to assist in
the process two recruitment consultants have been appointed.
Having two consultancy firms will assist the Committee in
ensuring that a diverse candidate pool can be considered.
Succession planning below Board level, with a focus on
developing a diverse executive pipeline, is also considered by
the Board on an annual basis. Diversity will be a key area of
focus for 2021 with a Women in Leadership programme
being launched in early 2021 and a review of all aspects of
recruitment being undertaken to analyse how we attract and
recruit diverse candidates. The Committee will review the
outcomes of these initiatives during the year.
Nigel Stein
Chairman
Our 2020 objectives
Board appointments and
succession planning
Board composition
Governance
Committee evaluation
What we achieved
Appointment of Duncan Tait as Group Chief Executive Officer
Appointment of Alex Jensen as Non-Executive Director
Review of skills, experience and diversity in the context of the
requirements of the Ignite strategy, taking into account length
of service
Review of policy on multiple board appointments, time
commitments and assessment of Non-Executive Director
independence
An external evaluation carried out in 2020. See page 64 for
further details
Priorities for 2021
Appointment of two Non-
Executive Directors
Strategy refresh and likely skills
gap in the next five years
Monitor other commitments of
Board members to avoid
overboarding and lack of time
Review of people metrics to be
considered by the Committee
and reported to the Board
Skills, experience and diversity
The review of skills, experience and diversity is carried out by the Committee annually by way of an assessment completed by the
Board members. Of the skills, knowledge and experience considered necessary for the Board members, digital remains key as this is
a rapidly evolving area for the automotive industry and as such is a key consideration for succession planning. The Board has been
strengthened in this area by the appointment of Duncan Tait and Alex Jensen and the digital capabilities below Board level have
been enhanced with the appointment of a new Chief Information Officer to the Group Executive Team.
The experience of the Board members covers a wide range of sectors and industries and in addition we also have several Board
members from outside the traditional UK plc background and this diversity of thought adds to our decision making. However, we
recognise that this is a constantly evolving environment and ensuring that we have the right mix of individuals to support and
challenge management, to avoid group think and to make the right decisions to facilitate the long-term success of the Group
remains paramount. This assessment assists with the search for suitable candidates and forms part of the recruitment process.
Succession planning
The Committee’s continual succession assessment looks at length of service in addition to the review of skills in the context of the
Group’s strategy over the longer term to ensure that vacancies are filled as they arise. There are cases when a Director’s resignation
is unplanned and therefore a list of potential candidates is kept up to date for these circumstances. A search is currently underway
for a Non-Executive based in the Asia region and for an additional Non-Executive Director with strong financial experience to
replace Rachel Empey. Till Vestring, who is resident in Singapore, is assisting with the succession plan for the role which has been
invaluable due to current travel restrictions. The appointment of two further recruitment consultants will provide the Board with a
diverse candidate pool to assist in meeting the recommendations set out in the Parker Review.
Appointment process
Despite the challenges posed by the global lockdown, the recruitment process for a new CEO ran smoothly. The Lygon Group were
appointed to assist in the recruitment and after an appropriate job specification was agreed, a long-list of candidates was
considered. From this, the short-list was agreed consisting of internal candidates identified during the succession planning process,
and external candidates identified by the recruitment consultant. Potential candidates met with the Chairman, the outgoing CEO,
and other Board members after which the Committee made its recommendation to the Board for approval. During the recruitment
process a comprehensive assessment was carried out to evaluate each candidate’s capability, strengths, potential and personal
attributes needed to drive the business.
The Lygon Group is a signatory to the Voluntary Code of Conduct for Executive Search Firms and does not have any other
connection to the Company or any individual Director.
Length of service
Gender
Nationality
Residence
1
1
2
5
0 to 3 years
4 to 6 years
7 to 9 years
9+ years
3
Male
Female
1
1
1
1
7
7
British
German
Dutch
7
Asia
EU
UK
Inchcape Annual Report and Accounts 2020
63
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate governance report – Composition, succession and evaluation continued
DIVERSITY POLICY STATEMENT
The Committee recognises the benefits of having a diverse
Board and sees this as an essential element in delivering the
Group’s strategic objectives. We value diversity of skills and
industry experience as well as background, race, age, gender,
educational and professional background as we believe this
adds fresh perspectives which enrich our decision making and
the aim of the policy is to reflect this ethos.
The Board’s policy on diversity is a verbally agreed principles-
based policy. It is clearly understood by our recruitment
consultants and is taken into account when considering
succession planning and external hires. The Board considers all
aspects of diversity to be relevant and all Board appointments
are made on merit and in the context of the skills and
experience needed for the Board to be effective, however its
minimum target is to achieve the recommendations set out in
the Hampton-Alexander and Parker Reviews. With the
appointment of Alex Jensen in January 2020, the Board has
33.33% female representation therefore has reached its
minimum diversity requirement.
The Board philosophy on diversity is also reflected throughout
Inchcape where we employ a diverse workforce across 34
countries. We value the unique contribution that each person
brings to Inchcape and we aim to employ people who reflect
the diverse nature of society, regardless of age, sex, disability,
sexual orientation, race, colour, religion, ethnic origin and
political belief.
The Committee’s terms of reference can be found at www.
inchcape.com.
The feedback confirmed that the culture on the Board is
inclusive, engaged and supportive, but challenging when
necessary. The review showed that the Board works well
together and there are already strong relationships between
new Board members. The Board has engaged well with senior
management and spent time understanding the issues
presented by COVID-19.
The feedback highlighted the following:
Strengths
Areas to progress
Board focus
Risk management
Relationship with senior management CSR Committee
Decision making
Board meetings
Audit and Remuneration Committees
Board composition
Strategy
Nomination Committee
Data metrics
Areas of focus for 2021
IBE made a number of recommendations, which the Board
discussed at a meeting with Lisa present. It was agreed that
the main areas of focus for 2021 would be as follows:
Board
– Ensure sufficient focus on refreshed strategy and oversight
of purpose
– Oversight of climate-related reporting and the broader
ESG agenda
CSR Committee
– Determine scope and remit beyond current terms of
reference
Group Executive Team and its direct reports:
Male
– Interplay with the refreshed strategy, and how it can
Female
enhance the main Board agenda on ESG
Group Executive Team
Direct reports
8
37
1
19
– Workforce engagement
– Climate change reporting
Diversity throughout the organisation, including on the Group
Executive Team, will be a key area of focus for the newly formed
Responsible Business group. Further details are on page 72.
Board evaluation
In line with the Code, an external Board evaluation was carried
out in 2020 by Lisa Thomas of Independent Board Evaluation
(”IBE”). IBE has no other connection to the Company or any
individual Director and this disclosure has been approved by
IBE. The Chairman spent time agreeing a detailed brief with Lisa
prior to the commencement of the review.
The process of review consisted of one to one interviews with
the members of the Board and several non-Board contributors
(”NBCs”) including members of the Group Executive Team, the
external auditor and remuneration consultants. Board and
Committee meetings were also observed with supporting
materials provided to support the evaluation. The findings
covered feedback from the Board and NBCs, benchmarking
data, and IBE’s recommendations of Board effectiveness.
Feedback was also given to each Committee chair on the
performance of each of the Committees.
Jerry Buhlmann, the Senior Independent Director, received
feedback on the performance of the Chairman. Board
members gave positive feedback on the Chairman, particularly
his approach to mentoring new members and steering the
Board through its agenda during a time of crisis.
Nomination Committee
– Board composition – planning for the departure of two
long-standing Board members and on-boarding their
replacements
– Diversity at Board level and throughout the organisation
– Identify appropriate people metrics and KPIs
– Review of culture alignment with refreshed strategy and
purpose
Please see the Committee Reports for further details on each
Committee’s evaluation.
Update from 2019 internal evaluation actions
The actions arising from the internal evaluation in 2019 were:
Further management engagement – the travel restrictions as a
result of COVID-19 meant the Board was unable to meet senior
executives in person however regular dialogue took place
throughout the year, with the new Group Executive Team
members invited to present at Board meetings in 2020.
Diversity – the newly formed Responsible Business group will
focus on diversity and how this is reviewed and monitored at
Board level remains an action for 2021.
Wider reward landscape – the Remuneration Committee
received reports during the year on the reward landscape
throughout the organisation.
Stakeholder engagement – the Board will continue to assess
stakeholder engagement during 2021.
64
Inchcape Annual Report and Accounts 2020
Corporate governance report – Audit, risk and internal controls
Audit Committee report
John Langston
Chair of the Audit
Committee
Dear Shareholder
I am pleased to present the report of the
Audit Committee for the year ended
31 December 2020.
Committee members and attendance at meetings
Scheduled / attended
Ad hoc meetings
John Langston – Chair
Jerry Buhlmann
Rachel Empey
4/4
4/4
4/4
1/1
1/1
1/1
Allocation of time spent
Financial reporting
Internal audit, internal
controls, risk
External audit
Cyber security
Corporate governance
The aim of the report is to provide an overview of how the
Committee has discharged its responsibilities during the year,
and to highlight the significant issues considered by the
Committee. The Committee considers also whether the Annual
Report and Accounts, when taken as a whole, is considered
fair, balanced and understandable and provides the
necessary information for shareholders to assess the
Company’s position and performance, business model and
strategy. Further details can be found on pages 4 to 50.
The viability statement is given on page 50. The Committee
considered the length of time used to assess the Company’s
viability and is of the view that three years remains appropriate
given the nature of the business.
COVID-19
As mentioned throughout the 2020 Annual Report, the
COVID-19 pandemic brought unprecedented uncertainty.
During these times, it is of paramount importance to ensure
that the processes and procedures in place are working
effectively as disruptions such as these can derail usual
management and governance processes. The Committee has
focused on the control environment and cyber security to
ensure that the right procedures are in place to protect the
business and its assets.
Additional focus was also placed on the accounting
judgements and disclosures relating to the impact of COVID-19
on the Group’s businesses. This included government support,
tax deferral initiatives, liquidity and the impact on financial
covenants, the cost-restructuring programme and impairment
of site and intangible assets. The Committee also spent time
monitoring the financial reporting timetable to ensure that the
appropriate resources and robust processes were in place in
light of the additional challenges from working remotely and to
ensure the deadlines were achievable.
Internal controls
The Group had planned to introduce a new control framework
during the year, and I am pleased to report that this was
achieved successfully despite the challenges of 2020. The
feedback from the businesses has been overwhelmingly
positive and is a testament to the strong governance culture
within the Group. Further information on the new InControl
Standards is given on page 69.
In April, the Internal Controls team issued COVID-19 key control
guidance to ensure continued compliance with key controls
and processes especially where these relate to areas of
heightened fraud risk or the health and wellbeing of employees.
Cyber security
COVID-19 also impacted security risks faced by the business as
IT activity moved to remote working. The Committee reviewed
the additional security measures put in place as part of the
COVID response including cyber security training for all finance
teams, communications to employees on examples of criminal
cyber activity, enhanced monitoring of malware and other
alerts on the business and a review of data held by third
parties. During the year, the Group experienced a cyber attack
which interrupted operations briefly but was not material and
did not result in the loss of any customer data. The Group’s
principal risks have been updated to reflect the increased
exposure in this area. See page 43 for further details.
Financial Reporting Council (“FRC”) letter
In 2020, we received a letter from the Conduct Committee of
the FRC following a review of the cash flow and liquidity
disclosures in last year’s Annual Report and Accounts. The
FRC stated it would be incorporating some of our cash flow
disclosures, as examples of better disclosures, in their thematic
review of cash flow and liquidity disclosures which was
published in November 2020.
John Langston
Chair of the Audit Committee
Inchcape Annual Report and Accounts 2020
65
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate governance report – Audit, risk and internal controls continued
Our 2020
objectives
Annual Report
and Accounts
including
financial
statements and
accounting
judgements
Deloitte
independence
and objectivity
Deloitte 2020
audit plan
Internal Audit
Report
Risk
Management
Report
Non-Audit
Services Policy
and review of
non-audit services
Tax update and
litigation update
Cyber security
Committee
evaluation
Decisions made in respect of 2020
The Committee considered all key audit issues, accounting treatment and
judgements in relation to the financial statements. This includes challenging
management on the assumptions used and the judgements that have been
applied, with assurances given from both external and internal sources. The
Committee carried out an assessment of whether the Annual Report and
Accounts were fair, balanced and understandable. See page 68 for
further details.
The timetable for interim reporting was monitored closely to ensure that it was
achievable in light of the challenges presented by remote working for the
management teams and the external auditor.
Priorities for 2021
Review of key assumptions
used by management on
key accounting standards
Key disclosures include the viability statement on page 50, going concern, which
can be found on page 100, and goodwill, which can be found on page 145.
The Committee considered the report from the auditor in relation to the financial
statements and the 2019 Annual Report and Accounts as a whole and assessed
the auditor’s approach to, and findings in relation to, the audit to assess
independence and objectivity.
The Committee discussed the audit plan and agreed materiality, scope and fees. Review of the effectiveness
Continuous assessment
of audit quality and
effectiveness
The Committee reviewed and monitored:
– progress against the 2020 plan throughout the year;
– the status of open audit issues;
– any internal control failings; and
– the appropriateness of mitigation actions put in place by management.
The Committee approved the re-prioritised IA plan which was updated to reflect
business risks arising from COVID-19.
The Committee also reconfirmed the Internal Audit Strategy and the Internal Audit
Charter and approved the 2020 Internal Audit Plan.
The Committee reviewed the COVID-19 key controls guidance issued during the
year designed to ensure continued compliance with controls and processes
especially in areas with a heightened risk of fraud.
The Committee consider the risk management environment, major whistleblowing
reports and any mitigating plans implemented by management throughout the
year. Progress against plans is monitored closely and management are
challenged appropriately on areas where a satisfactory outcome is not evident.
Further details can be found on pages 41 to 50.
The Committee reviewed the non-audit services supplied by the external auditor
to ensure that they are in line with the Group’s Non-Audit Services Policy and best
practice guidelines. Further details can be found on page 71.
The Committee reviewed the Group’s tax costs, tax risks, efficiency and
effectiveness of tax policies along with updates on tax audits. It also reviewed any
significant litigation issues.
The Committee reviewed the increased security processes and measures put in
place as part of the COVID response plan, the short-term strategy focusing on
core security hygiene items and areas of current exposure and risk. The
Committee also considered the principal cyber risks and mitigating actions. See
page 43 for further details.
A external evaluation was carried out in 2020. See page 68 for further details.
of the external audit
Monitor progress against
2021 plan, resolving open
issues and improvement
plans in relation to
identified internal control
gaps
Review of the Enterprise
Risk Management system
Review of climate-related
risks
Review of non-audit
services supplied
Application of the
Non-Audit Services Policy
Monitor the tax strategies
within markets and at
Group level
Monitor the level,
frequency and type of
litigation within the Group
A review of the Group’s
cyber security risks,
mitigation plans, and
incidents will be carried
out annually
An internal review will be
carried out in 2021
66
Inchcape Annual Report and Accounts 2020
Significant issues considered by the Committee during the year
Impairment – see notes 11, 12 and 13 on pages 145-152
Impairment reviews are carried out annually in respect of goodwill and indefinite life assets, and if there is an indicator of
impairment, reviews are carried out on a more frequent basis. In addition, other intangible assets, property, plant and
equipment and right-of-use assets are reviewed for impairment if events or circumstances indicate that the carrying value
may not be recoverable. This is a judgemental process which requires estimating future cash flows based on future
business prospects, determining long-term growth rates and discount rates. It is the Committee’s view that management’s
approach to impairment is robust, based on reliable supporting data supplied by external sources, and with appropriate
challenge from the external auditor.
The Committee focused on the following aspects of the impairment:
– The Committee debated the cash flow projections used to calculate the value in use, considering whether these reflect
a reasonable expectation of future performance;
– The Committee considered how management had determined the discount rates and long-term growth rates;
– The Committee discussed the impact of climate change, including electrification on impairment and the impact of
electric vehicles on aftersales;
– The Committee reviewed the approach to scenario analysis in light of the uncertainty arising from COVID-19 and the
range of possible outcomes and the appropriateness of basing this on market recovery rather than improved business
performance;
– The Committee assessed the reliability of data provided by external advisors and independent specialists used in key
assumptions; and
– The Committee also discussed the appropriateness of the disclosures to be made in the Annual Report to satisfy itself
that they provided users of the financial statements with sufficient information to understand the judgements made by
the Group.
After considering all available information and reviewing the findings and supporting evidence from Deloitte LLP, the
Committee concluded that management’s impairment reviews of non-financial assets were appropriate and that an
impairment charge of £222.5m relating to goodwill, indefinite life assets, property, plant and equipment and right-of-use
assets should be recognised for the financial year ending 31 December 2020. The Committee and management continue
to closely monitor the impact of COVID-19 on the business during 2021 and the implications for cash flow forecasts.
Acquisitions – see note 29 on page 172-173
Part of the Group’s strategy is to invest to accelerate growth and the acquisition of Autolider, a distributor of Mercedes-Benz
passenger and commercial vehicles in Uruguay and Ecuador in late 2019, and the acquisition of Mercedes-Benz car and
private van distribution operations in Colombia in March 2020, typify this approach. Accounting for acquisitions requires
judgement to be exercised in assessing the fair value of assets and liabilities acquired including the identification of
intangible assets and the allocation of acquired businesses to cash generating units. Overall, it is the Committee’s view
that the Group’s approach to acquisition accounting is appropriate.
The Committee focused on the following aspects of acquisition accounting:
– The Committee considered whether the calculation of the fair value of assets and liabilities and the adjustments made
were appropriate;
– The Committee debated the assessment of the identification of distribution agreements as an indefinite life asset;
– The Committee discussed the robustness of the information provided by the external advisors to support the approach
taken by management and the proportion of the purchase price that was allocated to the value of distribution
agreements acquired; and
– The Committee reviewed the allocation of the business to a cash generating unit representing the totality of the Group’s
Daimler business operations.
The Committee concluded that it was satisfied with management’s valuations of these assets and liabilities including the
degree to which such valuations are supported by professional advice from external advisors and that the acquisitions
had been accounted for appropriately.
Inchcape Annual Report and Accounts 2020
67
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate governance report – Audit, risk and internal controls continued
Inventory and receivable provisioning – see notes 16 and 18 on pages 154-155 and 156
The Committee considered that the impact of the COVID-19 pandemic on the markets in which we operate and the
implications for the business of deteriorating credit and increased inventory levels, may result in increased probability of
customer default and a need to reduce selling prices to stimulate demand. In response to this, the Committee reviewed
management’s approach to inventory and receivable provisioning in 2020.
The Committee’s review focused on:
– Consideration of the net realisable value of inventory and the assumptions used to establish the estimated selling price and
the expected impact of COVID-19 closures resulting in obsolescence and slow-moving stock;
– Assessment of the pandemic’s impact on lifetime credit losses including a review of historic credit loss experience and the
adjustments made to those historic loss rates in arriving at expected credit losses; and
– The appropriate disclosure of the provisions / losses incurred as a direct consequence of COVID-19.
After considering all available information and reviewing the findings and supporting evidence from Deloitte LLP the Committee
concluded that the application of the accounting principles was appropriate throughout 2020 and the provisions recognised
for inventory of £54.4m and for trade receivables of £10.4m are appropriate.
Exceptional items – see note 2 on page 132-133
Exceptional items and alternative performance measures have been an area of focus and challenge by regulators, which
has been heightened in response to the way that companies have reported on the impact of COVID-19.
The Committee’s overall assessment is that the Group’s Exceptional Items Policy adheres to the key principles as set out in
guidance issued by the Financial Reporting Council and the European Securities and Markets Authority during 2020.
In line with the acquisition strategy, the Committee debated whether the business development costs incurred in identifying,
exploring and researching opportunities to participate in industry consolidation should be treated as exceptional, given that
such costs are recurring in nature due to the Group’s M&A activity. The Committee concluded that the reporting of such
costs as exceptional should only occur where they are material and relate to acquisitions that have completed as at the
reporting date.
The Audit Committee consists of three independent Non-
Executive Directors. John Langston and Rachel Empey are
qualified chartered accountants and are considered to have
recent and relevant financial experience. In addition, the
Committee as a whole has competence in the sector in which
the Company operates.
The Committee met four times during the year to coincide with
the financial calendar and held an additional meeting to
review key developments.
Only members of the Committee are entitled to attend
Committee meetings. However, the Chairman, Group Chief
Executive Officer, Chief Financial Officer, Group Financial
Controller and Group Head of Internal Audit attend the
Committee meetings along with the external auditor. Other senior
executives, such as the Group Tax Director and Group General
Counsel, attend during the year to present to the Committee.
The Committee regularly meets with the auditor without the
presence of management to discuss any areas of concern
they might have. John Langston also meets with the Chief
Financial Officer and Head of Internal Audit at one-to-one
meetings which enable him to fully understand the key issues
ahead of Committee meetings.
The Committee reviews its terms of reference annually.
The terms can be found on www.inchcape.com.
Committee evaluation
An external evaluation was carried out in 2020 noting the
Committee is functioning well with good processes in place to
give appropriate oversight by the Committee. Committee
members believe there is good input from all and challenge is
forthright when needed. The Group Head of Internal Audit has
brought renewed focus to Internal Audit and Risk and will be
supporting further strengthening of the control environment in
2021. To date the balance of the agenda between Audit and
Risk has been appropriate, but it is anticipated that more time
will be spent on the Risk agenda in 2021 to consider risks in light
of the refreshed strategy. A further meeting in January will be
scheduled to allow further consideration of the accounting
judgements and estimates prior to approval of the year end
financial statements.
Financial reporting
The role of the Committee in relation to financial reporting is to
review with both management and the external auditor the
appropriateness of the half year and annual financial
statements, taking into account:
– The quality and acceptability of accounting policies and
practices;
– Material areas in which significant judgements have been
applied or where significant issues have been discussed with
the external auditor;
– The clarity of the disclosures and compliance with financial
reporting standards and relevant financial and governance
reporting requirements including the Code;
– Any correspondence from regulators in relation to the
Group’s financial reporting; and
– Reviewing assumptions and providing assurance to support
the long-term viability statement.
Fair, balanced and understandable
The Board is responsible for presenting a fair, balanced and
understandable assessment of the Group’s position and
prospects in the Annual Report and Accounts, the interim
68
Inchcape Annual Report and Accounts 2020
financial statements and the trading updates. The Board
considers the weight given to published information to ensure
that it is of equal weight and there are no omissions. The Board
also ensures that narrative reporting is consistent with the
financial statements.
The Audit Committee also carries out its own assessment of
the financial statements, and the Annual Report as a whole,
and is satisfied that it provides the necessary information for
shareholders. The Committee considered whether the
information given in the financial statements is a true reflection
of the narrative reporting throughout the Annual Report and
Accounts, whether the key performance indicators give a
true indication of the health of the business and if the issues
considered of significant risk by both the external auditor and
the Committee are aligned.
The processes and procedures in place to satisfy the Board of
the integrity of the financial and narrative statements include
a robust disclosure verification process, monthly financial
performance updates, and meetings with the internal and
external audit functions without the presence of management.
A statement of the Directors’ responsibilities is set out on pages
99 to 100. The going concern statement is set out on page 100
and the strategy and business model are set out on pages 2
to 24.
Risk management
The Audit Committee has delegated responsibility for
ensuring that:
– There is an appropriate mechanism in place to identify
the risks the Group faces;
– Management teams have the correct focus on those risks
and the action plans in place to mitigate or respond to
those risks;
– A compliance programme is in place in all markets 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 to manage risk
effectively; and
– The Group’s 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.
Internal control
The Internal Control framework encompasses all controls
including those relating to financial reporting processes,
preparation of consolidated Group accounts, operational and
compliance controls and risk management processes.
InControl Standards
InControl Standards (“ICS”) is the newly implemented internal
control replacing the Group’s Minimum Control Framework
(“MCF”). The key theme being the enhanced simplification and
standardisation of our control framework in line with a risk-
based approach covering financial, operational and IT
processes. The ICS were approved by the Committee and
rolled out across the Group in 2020. ICS has been designed to
enable management to establish, assess and enhance strong
and consistent risk and control governance. The framework is
regularly reviewed and updated in line with emerging Group
risks, in response to emerging internal audit issues and also
following any investigation activity.
The standards form part of the broader control environment
consisting of:
– Culture and behaviours
– Code of Conduct
– Group, regional and local policies and procedures,
including legal and regulatory compliance
– Delegation of authorities
– Risk management process
– Roles and responsibilities
The ICS has been designed to mitigate the most significant risks
across the Group providing robust governance and a sound
controls framework to ensure:
– Reliability of financial reporting
– Effectiveness and efficiency of operations
– Compliance with applicable laws and regulations
They are also there to help protect us from:
– Fraud and misappropriation of cash and assets
– Material error in the financial statements
The central and regional Internal Controls teams support the
business by providing the framework, tools and training and
ongoing support to embed the ICS across the business which in
turn enables management to monitor the effectiveness of
controls in the business and to implement actions plans where
improvement is required. The Internal Control function is
separate from the Internal Audit function and works with
management teams to design controls that are proportionate
to the level of risk, supported by systems and easy to follow.
The Audit Committee receives regular reports from the Group
Head of Internal Audit covering Internal Audit, Internal Controls
and Risk Management. The reports provide an update on the
Internal Audit activities including an overall opinion on the
control environment for the period; the Internal Control
environment, with particular focus on the status of compliance
with the Group’s InControl Standards for both Business Controls,
IT general controls and the Risk Management programme
including the risk process, assessment and mitigating activities.
The reports are available to all Board members to allow them to
keep informed, and other Board members are also able to
attend any Committee meetings should they wish. However,
the Audit Committee also provides an update on the control
and risk environment to the full Board following each
Committee meeting.
Whistleblowing
Speak Up!, the Group’s externally hosted whistleblowing line,
is a compliance and ethics reporting solution which allows both
hotline and web reporting capabilities in multiple languages,
integrated with case management software to support efficient
and effective investigation, remediation and reporting. The
Group Head of Internal Audit reports to the Committee at each
meeting on fraud and whistleblowing claims that have been
received since the last Audit Committee meeting, and
significant currently open issues. The new and open cases
which are reported to the Committee are those of sufficient
significance to warrant attention, however a list of all reports
is also provided to the Committee along with a breakdown
by market, report type and source.
The Audit Committee chair reports to the Board on any significant
issues following each meeting. All Directors have full access to the
whistleblowing reports and other Audit Committee papers.
Inchcape Annual Report and Accounts 2020
69
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate governance report – Audit, risk and internal controls continued
Internal Audit
The aim of the Internal Audit function is to provide independent
and objective risk-based assurance for the Group by bringing
a systematic and disciplined approach to evaluate the
effectiveness of risk management, governance and control.
An annual programme of audit activity is approved by the
Audit Committee; this is flexed if required throughout the year
in accordance with the risk profile of the organisation and any
subsequent amendments are discussed in detail and agreed
by the Committee.
The function carries out audits across a selection of Group
businesses, functions and programmes which include the
management of risks and controls over financial, operational,
IT and other compliance areas such as GDPR and anti-bribery
and corruption.
The Internal Audit function, led by the Group Head of Internal
Audit, consists of appropriately qualified and experienced
employees with an in-depth understanding of the business
culture, systems, and processes. The Group Head of Internal
Audit reports to the Audit Committee and has direct access to,
and has regular meetings with, the Audit Committee Chair,
prepares formal reports for Audit Committee meetings on the
activities and key findings of the function and reports on
progress against mitigation plans. The purpose, authority and
responsibility of Internal Audit are defined in the Internal Audit
Charter, which the Committee reviews annually.
Due to the impact of the COVID-19 pandemic, the Internal
Audit function re-prioritised their plan during the year with
additional focus on ensuring that key controls to mitigate the
heightened fraud and operational risk in a COVID-19
environment were in place. The COVID-19 Key Control reviews
assessed a selection of markets with particular focus on
treasury, payroll, master data management, segregation of
duties, IT security and key control account reconciliations.
During the year the Internal Audit function carried out 64 audits
which included reviews of the key business and IT controls in
the UK, Europe, Asia, Australia and across Central and South
America. The team also carried out a number of risk based
reviews across the Group including Data Privacy, Business
Continuity and Anti Money Laundering. In addition to
undertaking a full programme of audit activities, the function
also provided a number of advisory engagements (where risk
and control systems and processes have recently been
introduced) and participated in investigation activities
where appropriate.
Internal Audit effectiveness review
The Internal Audit function continually assesses its effectiveness
by measuring performance against key performance
indicators, results of feedback from satisfaction surveys
following each audit, self-evaluation of compliance against the
Internal Audit Charter and Global Internal Audit methodology
and regular monitoring of its plans, performance and outputs
by the Audit Committee.
In addition, the Company Secretary facilitated an independent
review of the effectiveness of Internal Audit and reported the
findings to the Audit Committee in February 2021. The review
consisted of an online questionnaire completed by the
members of the Audit Committee, the Group Chief Executive,
the Group Finance Director, the Group Financial Controller, the
external audit lead partner, and the regional CFO for
Australasia, UK, Emerging Markets and Europe. The aim of
the independent review is to enable Internal Audit to develop
an action plan to address any areas where improvement
is required.
The review is split into five areas covering independence,
skills and experience, assurance and business improvement,
improvement of the IA function, communication and
performance.
The review concluded that the IA function is objective and
independent and has evolved to become more aligned with
the key issues of concern for the Audit Committee. The team
responded quickly to the COVID crisis demonstrating their
ability to deal with key business issues well. Progress on the
control agenda has been exemplary during a challenging year
however the focus for 2021 should be on the evolution towards
a more risk-based approach.
External audit
Following an audit tender process during 2017, Deloitte LLP was
appointed as the Group’s auditor. Deloitte assumed
responsibilities from PwC in May 2018 following shareholder
support for the appointment at the Annual General Meeting.
Anna Marks is the lead audit partner and has been in position
since the appointment of Deloitte LLP.
The Company confirms that it complied with the provisions of
the Competition and Markets Authority’s Order for the financial
year under review.
Auditor effectiveness, independence and objectivity
Ensuring that the external auditor provides a high quality audit
is a key activity of the Audit Committee as a high quality audit
provides stakeholders with assurance that the financial
statements give a true and fair view. The Committee carries out
its assessment on an ongoing basis by considering its
interactions with the auditor, its observations of the auditor and
the relationship between the Audit Committee, the auditor and
management.
The Committee encourages a culture of open communication
and debate and the Committee believes that it is able to ask
questions on key issues and to challenge when it feels more
information is needed. The Committee also looks at how
management responds to requests from the auditor and
carefully reviews the auditor’s findings and recommendations.
When the auditor supports management’s approach, the
Committee considers the evidence supplied by the auditor to
support its decision to ensure that the auditor is not
compromised and remains objective.
The auditor also meets with the Committee without the
presence of management on a regular basis, usually following
each meeting. This gives the auditor an opportunity to confirm
its view that management are addressing any issues raised
appropriately or to raise any concerns they may have.
External evidence of the quality of the audit is also vital in
assisting the Committee in its review of the effectiveness of
the audit.
70
Inchcape Annual Report and Accounts 2020
When evaluating the quality of the external audit the
Committee considers:
– Mindset and culture – the ethical and professional principles
adhered to by the auditor; whether the auditor has any
personal or commercial interests in the Group; and how they
have demonstrated high standards of independence,
integrity, objectivity and challenge throughout the year.
– Skills, character and knowledge – the auditing skills of the
audit team; level of knowledge of the automotive distribution
and retail industry possessed by the audit team; the auditor’s
understanding of its obligations to users of the financial
statements; and ability to challenge where appropriate whilst
maintaining strong relationships.
– Quality control – the processes the auditor has in place to
identify and address risks to the audit.
– Feedback from business – the Committee received
feedback from management on the quality of the auditor’s
delivery, communication and interaction with the various
finance teams across the Group.
The above attributes support the auditor in making reliable and
objective judgements and the Committee continually seeks to
assure itself that they are in place.
The auditors’ report to the Committee sets out the audit plan,
materiality, scoping, the risk assessment process, significant
risks, other areas of focus, the purpose of the report and
responsibility statement. The Committee reviews at each stage
of the audit to ensure that it is satisfied that the audit plan is
appropriate, if the auditor is meeting its obligations, and to
agree any changes to the audit if they arise.
Deloitte continually monitor their independence and ensure
that appropriate safeguards are in place including but not
limited to the rotation of senior partners and staff and the
involvement of other partners and staff to carry out reviews
of the work performed and to otherwise advise if necessary.
After considering all of the above elements, the conclusion
of the Committee is that the auditor carried out their audit
effectively and that the auditor is independent and objective.
Non-audit services
Implementing a Non-Audit Services Policy (the “Policy”) is also
key to ensuring the independence of the external auditor. The
Policy for non-audit services sets out the permitted and
non-permitted non-audit services as well as the approval levels
required by the Audit Committee and 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. However, using advisors who have an
understanding of the Group’s business can be a benefit and
the Committee will consider non-audit services supplied on an
ongoing basis. The Policy was updated in line with the revised
version of the Ethical Standard for auditors issued by the
Financial Reporting Council in December 2019.
The Group’s Policy on non-audit services to be provided by the
Group’s auditor defines two types of non-audit services that
may be performed:
– Regulatory services, which are services undertaken as auditor
or reporting accountant which are outside the scope of the
statutory audit but which are consistent with the role of
statutory auditor; and
– Permitted non-audit services, which are services that the
auditor may be permitted to undertake subject to the
appropriate level of approval.
The aggregate fees incurred for permitted non-audit services
relative to the audit fee should not exceed 70% of the average
audit fee over the previous three years, with such cap
applicable to both Group and UK audit fees.
The provision of permitted non-audit services will only be
approved by the Audit Committee if:
– Engagement of the auditor to provide the services does not
impair the independence or objectivity of the
external auditor;
– The skills and experience of the external auditor make it the
most suitable supplier of the non-audit service;
– The auditor does not have a conflict of interest due to a
relationship with another entity; and
– The aggregate fees incurred for permitted non-audit services
relative to the audit fee do not exceed 70% of the average
audit fee over the previous three years.
Permitted non-audit services above a certain level are
approved on a case-by-case basis by the Audit Committee.
In 2020, the fees for permitted non-audit services largely relate
to dealer benchmarking services provided by Deloitte in
Australia and the Group remains within the Audit Committee
approved ratio of audit to non-audit fees.
The following non-audit fees incurred with Deloitte were:
Regulatory services
Permitted non-audit services
2020
£’000
25
349
2019
£’000
11
281
The ratio for audit/non-audit work for the year ended
31 December 2020 is 0.01:1. Full details are shown in note 3d
of the notes to the financial statements.
Audit fees paid to the auditor
Fees paid for services provided by Deloitte (three year average)
were:
Audit fees
2020
£’000
3,365
2019
£’000
3,149
Inchcape Annual Report and Accounts 2020
71
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
CSR committee report
CSR Committee report
Till Vestring
Chair of the CSR
Committee
Allocation of time spent
Health & Safety
Workforce engagement
CSR strategy
Corporate governance
Committee Report. At the current time, these events will be held
virtually however the Committee will keep the situation under
review with a view to holding physical events when possible.
In order to obtain the views of the workforce in such a
challenging year, management carried out a pulse survey
covering specific areas due to the pandemic: impacts on the
individual and their wellbeing; communication; leadership and
management; and ways of working. Detailed action plans are
generated on a market by market basis. These are created
and owned by management with HR support and facilitation.
Global and regional outcomes, themes and trends are
considered by the Group Executive Team in a session led by
the Chief Human Resources Officer with each market CEO
presenting their action plan. Actions are closely monitored,
with short Pulse Survey questions aligned to areas of focus
measuring progress/improvement. The results from the survey
are discussed by the Committee and any issues arising are
communicated to the Board as a whole following each
update. Further details can be found on pages 34 and 35.
During the year Duncan also rolled out a new Responsible
Business (”RB”) working group to move the CSR strategy to its
next stage with a fully holistic approach that includes our
benefit to society, and to all groups of stakeholders, which is
woven into our business strategy. The RB group is made up of
over 22 colleagues from around the world covering all areas of
the business. This remit of the RB strategy will be developed
alongside the Group strategy to ensure close alignment of
vision and purpose. Further information can be found on
pages 8 and 9.
The Committee reviewed the global health and safety
programme during the year, monitoring progress against
action plans which included a single HSE system and an
HSE reporting tool to track compliance implemented globally.
These tools will give the Committee further transparency into
the health and safety culture within the organisation with
reports against KPIs being provided at each meeting.
In addition, the Committee monitored the COVID-19 HSE
response, including monthly and year to date cases within the
Group, health and safety processes in all businesses and the
risk assessment and flexible work assessments created for home
working risk assessments. Further information can be found on
page 36.
Till Vesting
Chair of the CSR Committee
Dear Shareholder
I am pleased to present the report of the CSR
Committee for the year ended 31 December
2020.
During the year, the Committee’s focus has been
on the health and safety of our employees and
the businesses around the world have worked
incredibly hard to keep each other, and our
customers, safe throughout the global crisis.
Till Vestring – chair
Jerry Buhlmann
Alex Jensen*
Duncan Tait*
Nigel Stein
Scheduled / attended
2/2
2/2
1/1
1/1
2/2
* Alex Jensen joined the Committee in November 2020. Duncan Tait joined the
Group in June 2020.
As I have been on the Board for over nine years I am pleased
to announce that I will hand over the role of Chair of the CSR
Committee and designated non-executive director (”DNED”)
to Alex Jensen with effect from 1 January 2021. It has been a
pleasure to be involved in Inchcape’s emerging CSR journey
and I am delighted that I will stay on as a member of the
Committee until I step down from the Board to support Alex as
the CSR journey moves forward.
We had planned to hold an employee townhall in Singapore in
early 2020 but that was put on hold as COVID-19 spread. We
had hoped the pandemic would be over quickly but following
the initial global lockdown, the markets experienced local
closures for the remainder of the year. As a result it was
decided to postpone the DNED townhall event until 2021.
Alex joined Duncan at the first virtual employee townhall event
held in February 2021 and the outcomes from the workforce
engagement programme will be disclosed in the 2021 CSR
72
Inchcape Annual Report and Accounts 2020
Evaluation
The external evaluation of the Committee carried out during the year highlighted the need for the remit of the CSR Committee to
evolve to align with the refreshed Group strategy. During 2021, the Committee will focus on defining its role so that it supports the
Group’s strategic agenda and working with the other committees to report into the Board to enable full oversight of all aspects of
environmental, social and governance matters. To date it has focused on elements of the social agenda, and we anticipate that
this will broaden out during the course of 2021.
Environment
The Group continued to monitor its GHG emissions during the year and details of the energy used are given on page 98. The
impact of climate change will be a key focus for the Committee and the Board with its commitment to reporting in line with the
recommendations under the Task Force on Climate-related Financial Disclosures (“TCFD”). To date the best estimates have been
used to judge the impact of climate change however the analysis to be carried out under TCFD will improve those estimates and
allow fuller disclosure next year. The Committee will monitor progress throughout 2021.
COVID-19
The pandemic presented opportunities for management to re-focus how they communicate more proactively with employees with
greater focus on regular cadence with senior leaders being more visible and a leadership communications platform launched in
the second half of 2020. The Committee also spent time reviewing the many community projects throughout the year, as the
regions provided support by providing resource and expertise to hospitals, charities and people in need throughout the year such
as in the Americas where they provided vehicles to transport key workers to and from work at local hospitals and produced videos
to explain social distancing and hygiene measures in place and donations of personal protective equipment; in Northern Europe
the donation of demo vehicles for Red Cross use and the delivery of food and supplies to isolated and vulnerable people; and in
Brunei where the team carried out a public awareness campaign early in the pandemic.
Workforce engagement mechanism – role of the DNED
The Board agreed that the CSR Chair would also take the role of the designated non-executive director with responsibility for
obtaining the views of the workforce. This is primarily done through reviewing the outcomes of the employee survey which are
discussed with management in detail, with attention given to those areas with lower scores or indicating areas for improvement.
Following each meeting, the DNED updates the Board on the findings and any action plans. During 2021, the DNED will attend the
quarterly townhalls and the Committee will focus on building the engagement plan during the year.
Our 2020 objectives What we achieved
CSR strategy
Establishment of Responsible Business working group to develop
approach alongside the refreshed strategy to ensure alignment of
vision and purpose
Modern Slavery
Statement
Review training rolled out to procurement teams to enable them to
recognise key risks to the Company, and action needed to manage
the risks
Employee Experience
Survey
Pulse survey completed in 2020 on the impact of COVID-19 on
employees, focusing on key areas:
– Impact on individual and their wellbeing
– Communication
– Leadership and management
– Ways of working
An external evaluation carried out in 2020, noting that the feedback
on the CSR Committee focused on determining the scope and remit
of the Committee
Committee
evaluation
Priorities for 2021
Develop communication
strategy to ensure effective
stakeholder engagement
Set Responsible Business vision
and build action plan
Measure and report impact
and success
Carry out analysis to identify
high risks suppliers and agree
due diligence processes to
mitigate risks associated with
those suppliers
DNED to join quarterly virtual
townhall to run a Director-only
session for employees
An internal evaluation will be
carried out in 2021
Inchcape Annual Report and Accounts 2020
73
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate governance report – Remuneration
Directors’ Report on Remuneration
Allocation of time
Jane Kingston
Chair of the
Remuneration
Committee
Executive remuneration
Incentives
Corporate governance
2020 Remuneration policy
During the early part of 2020, the Committee focused on
finalising our revised 2020 remuneration policy which we set out
in last year’s Annual Report. I would like to thank shareholders
for their advice and support, and we were pleased that the
remuneration policy received a significant vote in favour, at
94.5%, at the Annual General Meeting on 21 May 2020. Our
renewed policy ensures we meet important governance
standards and addresses both incumbent and new Directors’
pension arrangements.
In this DRR we explain in detail what actions were taken by the
Committee during the year as a result of the pandemic and
how we propose to implement the policy going forward.
COVID-19’s impact on remuneration
The actions taken in response to the pandemic are given on
page 60. The Committee continually monitored remuneration
decisions taken across the Group and considered all decisions
on executive and senior management pay during 2020 in this
context, together with the impact on our other stakeholders
including shareholders and the wider societies within which we
operate. The Committee was mindful of how remuneration
decisions contribute to wider cost saving initiatives aimed at
mitigating the impact of the pandemic on our business and
our colleagues. As a result, the following actions were taken:
– Salary increases were postponed for some employees in
2020, including the planned 3% increase for Gijsbert de
Zoeten, the Chief Financial Officer.
– Given the timing of the lockdowns, the 2019 bonus payment
had already been paid and the Committee made the
decision not to claw this back. There will be no bonus
payments for 2020 for the Executive Directors, Group
Executive Team (”GET”) and across most businesses within
the Group.
– The revision in the new remuneration policy around the
increase in bonus pay-out at target performance (from 40%
to 50% of max) was not applied to the 2020 bonus.
– Members of the GET and the Board agreed to take a 20%
salary or fee cut, applied for three months for the GET and
nine months for Non-Executive Directors. Also, senior
managers below the GET agreed to take temporary salary
cuts between 10% to 15% depending on grade.
– Duncan Tait, who joined as Group Chief Executive Officer in
June, also volunteered a salary reduction of 20% for his first
three months of service.
Dear Shareholder
On behalf of the Board, I am pleased to present
the Directors’ Report on Remuneration (“DRR”) for
the year ended 31 December 2020. During the
year, the Remuneration Committee focused on
the policy renewal, change of our CEO, together
with managing and mitigating the impact of
COVID-19.
As discussed throughout the Annual Report and
Accounts, COVID-19 impacted the business in
all of our markets. Throughout, our primary
concern has been to ensure the health, safety
and wellbeing of our employees across the
world. The Committee, together with the Board,
would like to thank all of our colleagues who
have demonstrated incredible courage and
resilience throughout this extraordinary year.
Membership
Jane Kingston – Chair
Jerry Buhlmann
Nigel Stein
Till Vestring
Number of meetings
held/attendance
Ad hoc meetings
held/attendance
2/2
2/2
2/2
2/2
3/3
3/3
3/3
3/3
74
Inchcape Annual Report and Accounts 2020
Business performance in 2020
Shareholders will be aware that, in addition to the challenges
of COVID-19, the global automotive industry is undergoing a
period of significant change and disruption, and against this
backdrop we are pleased with the Group’s financial
performance, reliably delivering results that, whilst below the
original goals that we set ourselves for 2020 before the
pandemic, exceed mid-year expectations.
The Group delivered revenue of £6.8bn, profit before tax of
£129m, EPS of 23.6p (basic adjusted) and ROCE of 12.3%.
Furthermore, we are delighted with the significant strategic
progress which continues to be made through the
implementation of the Group’s strategy, and the focus on
our Distribution business.
Remuneration outcomes for 2020
2020 Targets
Notwithstanding the severe affect the pandemic has had on
our business and the financial implications for employees at all
levels, no changes have been made to the targets which were
determined pre-COVID-19 for either the annual bonus or the
2018 PSP/CIP awards.
2020 Bonus
As the financial targets for the 2020 bonus were not achieved,
this, coupled with the experience of shareholders and other
stakeholders, has resulted in the decision to make no payments
to Executive Directors, members of the GET and most
management participants (not withstanding that good
progress has been made versus strategic goals).
2018 PSP/CIP
Achievement of the 2018 PSP/CIP performance targets was
significantly impacted by the detrimental effects of COVID-19,
and will vest at an overall rate of 28.5% with only the ROCE
target being within range.
2020 PSP/CIP award
Long-term incentive awards are usually granted immediately
following the AGM at which a policy is approved by
shareholders. Mindful of two newly-appointed executives and
the need to provide long-term motivation for the wider PSP
population (of approximately 300 employees), the Committee
agreed it would be important to continue to grant the 2020
PSP/CIP with the targets which had been determined before
the global pandemic and which had already been disclosed
in the 2019 DRR. However, the Committee considered the share
price to be used to calculate the 2020 awards, to ensure that
any awards granted in 2020 would not result in considerably
higher numbers of shares, compared to 2019, due to
fluctuations in share price as a result of COVID-19. As a result,
a 10% reduction was applied to the number of shares granted
to the Executive Directors, GET and other senior managers to
ensure that the awards reflect shareholder experience and
alignment with other stakeholders.
Plans and targets for 2021
As already noted, the Committee considered the
implementation of the approved 2020 remuneration policy in
light of these challenges and agreed the planned increase in
bonus pay-out at target (from 40% to 50% of max) would not be
implemented until the 2021 bonus cycle.
2021 Bonus
The matrix style bonus, combining revenue and profit, will
continue to apply to executives and senior managers for the
2021 performance year. Performances ranges have been
widened compared to those used in 2020, to take account
of the uncertain trading conditions in all of our markets.
Furthermore, assumptions around the impact of the continuing
COVID-19 pandemic on our ability to trade in our geographic
markets fundamentally influence these performance ranges,
and the Committee will review the pre-defined external market
assumptions that underpin the annual bonus plan to ensure
they continue to be relevant.
2021 LTIPs
At the time of writing, the Committee intends that the 2021 LTIP
targets will continue to be three-year average ROCE, cash
conversion and three-year cumulative EPS. However, given the
significant and continuing COVID disruption to trading, the
Committee was not able to finalise and therefore disclose
targets at the time of writing. We hope to be in a position to do
so over the coming months and will disclose these targets as
soon as we are able.
CEO appointment
Duncan Tait joined as CEO on 1 June 2020 with a base salary
of £780,000, a pension contribution of 10% of salary and
incentives and benefits consistent with the remuneration policy.
He did not receive any amounts in lieu of awards forfeited at his
previous employer. We are delighted that Duncan immediately
demonstrated his commitment to the Group by purchasing
11,502 shares.
Stefan Bomhard, former CEO, left the Group on 30 June 2020.
In line with the remuneration policy, and his leaving status,
Stefan Bomhard did not receive a bonus for 2020 and all his
outstanding PSP and CIP awards (i.e. those granted in 2018
and 2019) lapsed in full. Stefan did not receive any exit
payments. Prior to leaving the Group, Stefan was entitled to
receive shares due under the 2017 PSP and CIP award in May
and June 2020 respectively. These shares are held in a
nominee account for the required two-year post vesting
holding period.
Resulting performance outcomes
The Committee is satisfied that the total remuneration received
by Executive Directors in 2020 appropriately reflects the
Company’s performance over the year, is in line with policy and
is consistent with the approach taken for other employees. The
Committee is also satisfied that the approach to setting
remuneration for 2021 underpins the effective and proper
management of risk by rewarding fairly for sustainable profit
growth and long-term returns for shareholders.
Inchcape Annual Report and Accounts 2020
75
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate governance report – Remuneration continued
The Committee is mindful of the fact that our two recently-
recruited Executives received no long-term incentive awards
to compensate them for forfeited awards from their prior
employment and now, as a result of the pandemic, have a
significantly reduced opportunity to build shareholding via
the 2020 long-term incentives. This situation will be kept
under review.
During 2020, under Duncan’s leadership, the Group renewed
its focus on our Responsible Business agenda incorporating
ESG initiatives. In 2021, the Committee will be mindful of the
need to reflect this strategic thrust in our remuneration
framework at an appropriate point in the future.
We hope to have your support at the upcoming AGM.
Jane Kingston
Chair of the Remuneration Committee
Shareholder consultation
On behalf of the Committee, and together with the Chairman,
I had the opportunity to speak with a number of our key
shareholders whose advice was reflected in the renewal of the
remuneration policy. Their input guided the Committee’s
decisions around appropriate phased pension payment
reductions for the former Executive Directors, post-termination
shareholding guidelines and maintaining the co-investment
plan as an effective mechanism through which to encourage
alignment with shareholders.
As soon as it became apparent that the pandemic was
impacting operations globally, the Committee wrote to
shareholders to inform them of the immediate remuneration
decisions being made so that shareholders had the
opportunity to give their feedback.
Committee evaluation
In line with the UK Corporate Governance Code, an external
Board evaluation was carried out in 2020. As part of that
evaluation, a review of the Committee was undertaken which
covered membership, meetings, the performance of the chair,
clarity of objectives and terms of reference and quality of
external advice. The Committee was satisfied with the
performance of the Committee and discussed some minor
changes for improvement.
Looking forward
2020 has undoubtedly been the most challenging year for us in
living memory. The Executive Directors, our Group Executive
Team, along with all of our employees across the world, have
worked tirelessly to ensure the business remains strong and
stable, and that customers, and each other, have been able to
stay safe throughout. The Committee is committed to ensuring
the remuneration arrangements continue to support the efforts
of the workforce and the objectives of the strategy, whilst
aligning pay with strong performance, and the interests of
executives and senior management with those of shareholders
and good corporate governance.
Having reviewed the year end results, management proposed
to reinstate the 2020 pay review planned for April 2020 and
which was subsequently deferred. This was applied with effect
from January 2021. There will be no back-dating of this award
to those who receive it. The Committee decided that the same
principle should apply to Gijsbert de Zoeten and members of
the GET, but not to Duncan Tait who joined subsequently.
The Committee also approved the global average workforce
annual salary review of 3.28% and the average workforce
annual salary review for Group employees of 2.5%. Duncan Tait
will receive an increase of 2.5% in line with this average. Gijsbert
de Zoeten has been awarded an increase of 3.8% which is
above this average as the Committee believes this is in
recognition of significant additional responsibilities he now has
following the departure of the Group Strategy Director, and his
performance and contribution to the business to date.
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Inchcape Annual Report and Accounts 2020
Executive Directors’ remuneration in 2020
What Executive Directors earned during 2020 (£’000)
Duncan
Tait
Gijsbert
de Zoeten
416
461
Base salary
Benefits
Pensions
Other
DETAILS OF ACTUAL PERFORMANCE ACHIEVED ARE GIVEN ON PAGES 87 TO 91
3 46
3
£468
194
49
3
£707
How we performed in 2020
Despite the challenges of COVID-19, the Group’s performance reliably delivered results that, whilst below the targets set before the
pandemic, are in line with revised expectations.
Furthermore, we are delighted with the significant strategic progress which continues to be made through the implementation of
the Group’s strategy, and the focus on our Distribution business.
Measures used for annual bonus
Measures used for long-term incentive plans
Profit before tax
Revenue
Objectives
EPS
ROCE
Revenue
EPS (Earnings per share)
Threshold
£8,065.0m
Stretch
£8,914.0m
23.6p
Actual*
£7,036.4m
Profit before tax
Target
£8,489.5m
ROCE (Return on capital employed)
Threshold
£273.9m
Stretch
£334.7m
12.3%
Actual*
£135.7m
Target
£304.3m
FURTHER INFORMATION ON ANNUAL BONUS AND LONG-TERM INCENTIVE PLANS CAN BE FOUND ON PAGES 88 TO 91
* Actual performance for determining bonus outcomes has been calculated using the same currency rates as used to set the bonus targets, and both targets
and performance have been determined on an IFRS 16 basis. This approach helps ensure that the bonus is linked to underlying financial performance.
Inchcape Annual Report and Accounts 2020
77
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate governance report – Remuneration continued
Part 1 —
Directors’ remuneration policy
This section of the report sets out the policy that was approved by shareholders at the 2020 Annual
General Meeting held on 21 May 2020.
Alignment of the remuneration policy
This section outlines how clarity, simplicity, risk, predictability, proportionality and alignment to culture were addressed when
reviewing the remuneration policy and its implementation as required under provision 40 of the UK Corporate Governance Code.
– The Committee believes that the disclosure of the design of remuneration arrangements is transparent with clear rationale
provided on maintenance and changes to policy. The Committee remains committed to consulting with shareholders on the
policy and its implementation
– The Committee believes the performance measures used in the long-term incentive plans, along with those in the bonus, also
aid simplicity due to the clear alignment to Inchcape’s strategy, and are familiar to all stakeholders
– The Committee has ensured that remuneration arrangements do not encourage and reward excessive risk taking by setting
targets to be stretching and achievable, with discretion to adjust formulaic bonus and PSP outcomes and expanding the
circumstances in which malus and clawback can be applied
– The link to strategy of the performance measures used and the setting of targets balances predictability and proportionality by
ensuring outcomes do not award poor performance in the short and long term. The policy is consistent with Inchcape’s culture
as well as strategy, therefore driving behaviours which promote the long-term success of Inchcape
Remuneration policy for Executive Directors
Element
Base salary
Objective and link to strategy
To pay a competitive salary which
attracts, retains and motivates talent to
make decisions which drive the
Company’s strategy and create value
for stakeholders.
Annual bonus
To motivate and reward for the
achievement of the Company’s strategic
annual objectives.
Operation and performance metrics
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.
Financial measures may include (but are not limited
to) revenue and profit. Non-financial measures may
include strategic measures directly linked to the
Company’s priorities.
Any annual bonus earned above 100% of salary is
paid in shares which are automatically invested in
the CIP.
Bonus payouts are subject to malus and clawback
provisions.
Performance
Share Plan
(PSP)
To provide a meaningful reward to
senior executives linked to the long-term
success of the business.
Vesting of the PSP awards is based on performance
measures linked to the Group’s strategic priorities
and may vary year-on-year.
The use of performance shares enables
the delivery of median pay for median
performance and upper quartile pay for
upper quartile performance.
Vested awards will be subject to an additional
two-year holding period.
Any dividends paid would accrue over the vesting
period and would be paid only on those shares that
vest. Dividends can be paid in cash or shares.
Current practice is for dividends to be paid as
shares.
PSP awards are subject to malus and clawback
provisions.
Opportunity
Increases are not expected
to exceed the average
increase for senior
management, unless a
change in scope or
complexity of role applies.
150% of salary maximum
payable for achieving stretch
performance against all
measures.
75% of salary payable for
target performance.
15% of salary payable for
entry level performance.
Normal PSP opportunities will
be 180% of salary.
Award levels are subject to
an individual limit of 300%
of salary.
Threshold level performance
will result in 25% vesting of the
PSP award.
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Inchcape Annual Report and Accounts 2020
Remuneration policy for Executive Directors continued
Element
Co-
Investment
Plan (CIP)
Objective and
link to strategy
To encourage executive
share ownership and
reinforce long-term
success.
A voluntary investment
opportunity in return for
a performance-based
match.
Any annual bonus
earned 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.
Save As You
Earn (SAYE)
To encourage share
ownership.
Pension
To provide market
competitive pension
benefits where it is
cost-effective and
tax-efficient to do so.
Other benefits
To provide market
competitive benefits
where it is cost-effective
and tax-efficient to
do so.
In-post
shareholding
guidelines
Post-exit
shareholding
guidelines
To encourage share
ownership and
alignment of executive
interest with those of
shareholders.
To reinforce long-term
alignment of executive
interests with those of
shareholders post-
termination.
Operation and performance metrics
Any bonus earned 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 the CIP awards is based on performance measures
linked to the Group’s strategic priorities and may vary year-on-year.
Opportunity
Executive Directors may invest
up to an overall maximum of
50% of salary. Maximum match
of 2:1, threshold of 0.5:1.
Maximum matching award is
therefore 100% of salary in any
year, and threshold matching
award is 25% of salary.
For awards granted to the Executive Directors, vested awards will be
subject to an additional two-year holding period.
Any dividends paid would accrue over the vesting period and
would be paid only on those shares that vest. Dividends can be
paid in cash or shares. Current practice is for dividends to be paid
as shares.
CIP awards granted are subject to malus and clawback provisions.
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.
Receive a salary supplement in lieu of pension contributions.
In addition and in line with other UK-based employees, Executive
Directors are also entitled to participate in the Group’s pension
scheme, Cash+, which is a cash balance retirement scheme which
accrues 16% of earnings (capped at £250,000 p.a.) paid as a lump
sum at the age of 65. In this scheme, members are required to
contribute 7% of pensionable salary. The scheme closed on 31
December 2020.
Benefits currently include (but are not limited to):
Company cars;
Medical care; and
Life assurance premiums.
Participation limits are those set
by the UK tax authorities from
time to time.
Executive Directors are entitled
to a cash supplement of up to
10% of salary.
Executive Directors who were
appointed prior to 2019 were
entitled to a pension
contribution of up to 30%
of 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).
Executive Directors are required to accumulate, over a maximum
period of five years from date of appointment, a number of shares
equivalent to a shareholding worth 200% of base salary.
n/a
A departing Executive Director is required to maintain a
shareholding for two years post-termination, set at the lower of the
actual shareholding on exit and the in-post shareholding guideline.
n/a
Enforcement of this guideline will be facilitated through a holding
requirement for Executive Directors applied to share-based
incentives awards from 2020 onwards.
The application of this requirement will be at the Committee’s
discretion (which will be applied only in exceptional
circumstances).
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 and target setting
As part of the remuneration policy review, the Committee
reviewed the appropriateness of performance measures used
by the Group and determined the following:
– The annual bonus measures have been selected to
incentivise sustainable growth in profits. The matrix structure
continues to provide a balanced focus between commercial
and cash initiatives. A mix of strategic measures will continue
to be selected each year to reinforce the Group’s strategic
objectives.
– The Committee believes that EPS and ROCE continue to be
suitable measures of long-term performance for the Group.
EPS is consistent with the Group’s long-term strategy focusing
on sustainable growth while ROCE supports the Group’s cash
Inchcape Annual Report and Accounts 2020
79
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate governance report – Remuneration continued
initiatives of controlling working capital and capital
expenditure. When ROCE is used in combination with EPS, it
ensures there is a balance between growth and returns. The
new cash conversion measure reflects the criticality of cash
generation for Inchcape, which is required to support its
continued evolution.
– 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.
– The Committee has considered the use of other performance
measures to reinforce the Company’s long-term objectives,
including relative TSR. However, given the diversity of the
Group’s operations, it would be difficult to set a relevant and
robust comparator group for assessing relative TSR
performance and there would be some difficulty in
cascading appropriately down the organisation.
– Targets are set taking into account a range of reference
points including the strategy and broker forecasts for the
Group. The Committee believes that the performance targets
set are appropriately stretching, set to reward for
outperformance of the market and that the maximum will
only be achievable for truly outstanding performance. Please
see pages 88 to 91 for further details on the target ranges.
– The Committee retains discretion to adjust the annual bonus
outcome up or down to ensure that it is a fair reflection of the
Group’s underlying performance. The Committee also has
the ability to adjust the number of shares vesting under the
PSP to ensure it is a fair reflection of underlying performance
during the performance period.
– The Committee also has the discretion to adjust the
performance conditions for long-term incentive plans in
exceptional circumstances, provided the new conditions are
no tougher or easier than the original conditions.
– Any discretion exercised by the Committee in the adjustment
of performance conditions will be fully explained to
shareholders in the relevant Annual Report on Remuneration.
If the discretion is material and upwards, the Committee will
consult with major shareholders in advance.
Malus and clawback
These provisions allow the Committee in certain circumstances
(such as gross misconduct or a material misstatement of the
Group financial statements, reputational damage or corporate
failure) the discretion to:
– reduce bonus, PSP and/or CIP;
– cancel entitlement of bonus;
– prevent vesting of the PSP and/or CIP; or
– allow the Company within two years of payment/vesting of
award to claim back up to 100% of the award.
Participants are informed about the malus and clawback
conditions on their bonus at the start of each year and are
required to confirm acceptance of malus and clawback
provisions on their PSP and CIP awards upon grant.
Composition of remuneration arrangements
A significant proportion of Executive Directors’ pay is variable, long term and remains ‘at risk’ (i.e. subject to malus and
clawback provisions). Charts are based on maximum payout scenarios for Executive Directors.
Fixed vs. variable (%)
21
79
Fixed: base salary, benefits and pension
Variable: annual bonus, PSP and CIP
Short-term vs. long-term (%)
37
63
Short-term: fixed plus annual bonus paid as cash
Long-term: PSP, CIP and annual bonus deferred into CIP
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 employees 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 country and
organisational level, with business unit-specific metrics
incorporated where appropriate. Commission-based
arrangements are also operated for certain roles.
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Inchcape Annual Report and Accounts 2020
Senior managers also receive PSP awards while participation in
the CIP is limited to Executive Directors, Group Executive Team
members and the next level of executives (c. 20 individuals).
Performance conditions are consistent for all participants while
award sizes vary by organisational level. In-post 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. The Group has
calculated the average equivalent pension contribution across
UK employees to be 10% of salary.
Remuneration policy for Non-Executive Directors
Objective and link to strategy Operation and performance metrics
To provide fair remuneration,
reflecting the time commitment
and responsibilities of the role.
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.
Opportunity
Appropriate adjustments may
be made to fee levels, taking
account of:
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 Chair of any of the Board’s Committees
(excluding the Nomination 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.
– increases awarded across the
Group as a whole and
conditions elsewhere in
the Group;
– fee levels within organisations
of a similar size, complexity
and type; and
– changes in complexity,
responsibility or time
commitment required for
the role.
Fees paid to Non-Executive Directors are within the limits approved by shareholders. This limit, currently at an aggregate
of £1,000,000, was last approved by shareholders at the 2015 AGM.
Non-Executive Directors’ term of appointment
The Non-Executive Directors are appointed for an initial three-year term which can be terminated by either party on one month’s
notice (six months for the Chairman).
Jerry Buhlmann
Rachel Empey
Alex Jensen
Jane Kingston
John Langston
Nigel Stein
Till Vestring
01 March 2017
26 May 2016
29 January 2020
25 July 2018
01 August 2013
08 October 2015
01 September 2011
One month
One month
One month
One month
One month
Six months
One month
Consideration of conditions elsewhere in the Group
The Committee reviews and approves all remuneration
arrangements for the Group Executive Team and the Company
Secretary. The Committee also reviews the pay budgets and
benefit structures across the general population which are
considered when determining remuneration for Executive
Directors and the Group Executive Team.
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 and therefore pay levels and structures vary to
reflect local market conditions. Although the Company has not
carried out a formal employee consultation regarding
executive remuneration, it does comply with local regulations
and practices regarding employee consultation more broadly.
This includes the Employee Experience Survey conducted in
2020, more detail of which is provided in the CSR Report on
page 72.
The remuneration policy is published in the Annual Report and
Accounts and is available to all employees for their review. The
Remuneration Committee is available to answer any questions
employees may have about the policy or to provide
clarification on any remuneration matters. Elements of the
policy are cascaded down the organisation such as bonus
and long-term incentive plans. The new policy also aligns the
pension contribution for newly appointed Executive Directors
with the UK employee average which is currently 10% of salary.
Consideration of shareholder views
When determining remuneration, the Committee takes into
account the guidelines of representative investor bodies and
proxy advisors and shareholder views.
The Committee is always open to feedback from shareholders
on remuneration policy and arrangements. We are committed
to undertaking shareholder consultation in advance of any
proposed changes to remuneration policy, as evidenced by
our recent consultation with shareholders representing 70% of
Inchcape Annual Report and Accounts 2020
81
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate governance report – Remuneration continued
the Company’s issued share capital. The Committee will continue to monitor trends and developments in corporate governance
and market practice to ensure the structure of executive remuneration remains appropriate.
Performance scenarios
The charts below show the remuneration that Executive Directors could expect to obtain based on varying performance scenarios.
These illustrations are intended to provide further information to shareholders regarding the pay-for-performance relationship.
However, actual pay delivered will be influenced by actual changes in share price and the vesting periods of awards. The charts
have been updated for their 2021 salary.
Duncan Tait – Group Chief Executive
Total remuneration (£’000s)
Gijsbert de Zoeten – Chief Financial Officer
Total remuneration (£’000s)
£5,440
62%
£4,321
52%
£2,042
27%
29%
28%
22%
43%
20%
16%
£883
100%
Minimum
On-target
Maximum Maximum
with share
price growth
Fixed remuneration
Annual bonus
Long-term incentives (PSP and CIP)
Notes on the performance scenarios:
£3,546
61%
£2,820
51%
£1,342
27%
29%
44%
£590
100%
Minimum
On-target
28%
22%
21%
17%
Maximum Maximum
with share
price growth
Fixed remuneration
Annual bonus
Long-term incentives (PSP and CIP)
Element
Fixed
remuneration
Assumptions
– Total remuneration comprises base salary, benefits and pensions
– Base salary – effective from 1 April 2021
– Benefits – as provided in the single figure table on page 87
– Pension – 10% cash in lieu of pension
Variable pay
Annual
bonus
CIP
Minimum On-target
No
payout
No
vesting
Target payout (50% of
maximum)
Assumes full voluntary
investment
Threshold match of 0.5:1
Maximum
Maximum payout
Maximum with
share price growth
Maximum vesting Maximum vesting + 50%
share price growth
PSP
No
vesting
Threshold vesting (25% of
maximum)
Maximum vesting Maximum vesting + 50%
share price growth
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Inchcape Annual Report and Accounts 2020
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
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 and receive a cash supplement on similar terms to
Executive Directors appointed after 2019.
New appointees will be eligible to receive normal benefits available
to senior management, including (but not limited to) company
cars, medical care, life assurance and relocation allowance.
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.
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.
The Committee will consider on a case-by-case basis if all or some
of the incentives forfeited on leaving a previous employer will be
‘bought-out’.
If the Committee decides to buy-out forfeited awards, the award
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.
The Committee retains the discretion to make use of the relevant
Listing Rule to facilitate such a buy-out.
Maximum annual grant value
n/a
n/a
n/a
150% of salary
300% of salary
100% of salary
n/a
The combined
maximum is not
intended to exceed
400% of salary
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 employees below Board level
are typically no higher than for Executive Directors.
Non-Executive Directors
In recruiting a new Non-Executive Director, the Committee will use the policy as set out in the table on page 81. 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 Chair of the Audit, Remuneration and CSR Committees as appropriate.
Inchcape Annual Report and Accounts 2020
83
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Corporate governance report – Remuneration continued
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 rules of the relevant plans (subject to any Committee discretion):
Component
Annual bonus
Circumstance
Resignation.
Death, ill-health,
redundancy, retirement or
any other reason which the
Committee may, in its
absolute discretion, permit.
Change of control.
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.
Treatment
Bonus will lapse unless the date of leaving is after
the year end and the individual is not serving their
notice period. The bonus will only be paid to the
extent the targets set at the beginning of the year
have been achieved.
The bonus will only be paid to the extent the
targets set at the beginning of the year have
been achieved.
Payment/vesting date
(if relevant)
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 bonus payment will be pro-rated for time
served during the year.
Either the end of the
performance period or at the
Committee’s discretion.
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.
At the normal release date
(save where the Committee
has discretion to determine
otherwise or the rules provide
otherwise).
Any unvested awards will be pro-rated for time
and performance.
At the time of change of
control.
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
Duncan Tait
Gijsbert de Zoeten
Date of contract
1 June 2020
27 August 2019
Notice period
12 months
12 months
Unexpired term
To retirement
To retirement
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.
84
Inchcape Annual Report and Accounts 2020
Part 2 —
Annual report on remuneration
The following section provides details of how the Company’s remuneration policy was implemented
during the financial year to 31 December 2020 and how it will be implemented in the financial year
to 31 December 2021.
The Remuneration Committee consists of three independent Non-Executive Directors and the Chairman, who was independent
on appointment. The Committee invites other individuals such as the Group Chief Executive, Chief Human Resources Officer and
external consultants to attend its meetings. No Director takes any part in any decision affecting his or her own remuneration.
The Committee reviews its terms of reference on an annual basis. The terms can be found at www.inchcape.com.
The table below details the decisions the Committee made in 2020 and its focus for 2021.
Focus area
Bonus scheme
Long-term
incentives
Executive
Directors’
remuneration
Group Executive
Team
remuneration
Wider
remuneration
Decisions made in respect of 2020
The Committee reviewed the outcome of the 2019 bonus
scheme and set targets for the 2020 bonus scheme.
The Committee agreed to delay the on-target increase from
40% to 50% of maximum as part of the Group’s COVID-19
response. Further details are given on page 88.
As the financial performance targets were not achieved no
bonus will be paid to the Executive Directors for 2020.
The Committee reviewed the outcome of the 2017 PSP and
CIP awards and agreed the grants for 2020. Details are on
pages 90 to 91.
A third measure was introduced into the PSP and CIP based on
cash. The weighting is 40% on each of EPS and ROCE, and 20%
on cash. See page 91 for further details.
The Committee considered the approach to the grant of the
2020 long-term incentive awards taking into account
shareholder expectations as a result of COVID-19. Further details
are given on page 91.
The Committee approved the overall 2020 remuneration for the
Executive Directors.
As part of the Group COVID-19 response, the Committee
approved a 20% salary reduction for Executive Directors from 1
April 2020 to 30 June 2020 with the new CEO taking a salary
reduction on his first three months of service from 1 June 2020 to
31 August 2020.
The 3% salary increase approved by the Committee for the CFO
was postponed from April 2020 to January 2021.
The Committee reviewed the remuneration for senior executives
taking into account pay for employees across the Group.
As part of the Group COVID-19 response, the Committee
approved a 20% salary reduction for the Group Executive Team
from 1 April 2020 to 30 June 2020. Salary increases previously
approved by the Committee were postponed to January 2021.
The Committee considered the reward landscape for the wider
workforce including total bonus outcomes for all senior
management, regional financial element and the distribution of
performance outcomes for personal objectives.
The Committee also reviewed data on the 2020 salary review
across the whole organisation. As part of the Group COVID-19
response, approximately 60% of the workforce were unable to
work. Further details are given on page 53.
Priorities for 2021
The Committee will review the bonus measures
and targets applicable for the 2021 bonus within
the framework of the remuneration policy
The Committee will review the 2018 PSP and CIP
outcomes and agree the grants for 2021 within
the framework of the remuneration policy
The Committee will set targets for performance-
related remuneration and consider appropriate
salary levels and other benefits
The Committee will set targets for performance-
related remuneration and consider salary levels
and other benefits
The Committee will continue to review executive
remuneration in the context of wider workforce
remuneration
Chairman’s fee
The Committee reviewed the Chairman’s fee in November 2020
and agreed an increase of 2.5% with effect from 1 April 2021.
Review benchmarking criteria to ensure the
Chairman fee is in line with the market
Inchcape Annual Report and Accounts 2020
85
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Corporate governance report – Remuneration continued
Focus area
Share plans
Decisions made in respect of 2020
The Committee approved an update to the share plan rules to
include reputational damage and corporate failure as
circumstances in which malus and clawback provisions could
be applied.
UK pension
arrangements
Following the Board’s decision to close the Cash+ scheme, the
Committee reviewed the progress made on the closure of the
Cash+ scheme and the establishment of a new DC scheme, the
Inchcape Retirement Savings Plan (“IRSP”).
Further details on the decisions are given in the S172 case study
on page 60.
Gender pay gap
report
The Committee reviewed the gender pay gap results and the
initiatives being introduced to close the gap.
The report can be found on www.inchcape.co.uk.
The Committee approved the methodology and assumptions
made in the calculation of the CEO pay ratio and approved the
statement made in last year’s DRR.
The Committee analysed the results of the 2020 CEO pay ratio
and approved the statement made on page 93.
CEO pay ratio
Committee
evaluation
Executive Director
and GET
appointments
Priorities for 2021
The share plans have been in place for 10 years
therefore the updated plan rules will be put to
shareholders for approval at the Annual General
Meeting in 2021
Full details of the plan rules can be found in the
annex to the Notice of Meeting and will be
available for inspection at the Company’s
registered office
The IRSP will be operational from 1 January 2021
The Committee will review the impact of the
initiatives and the results of the 2021 gender pay
analysis
The Committee will continue to monitor the results
of the CEO pay ratio calculations
An external Board evaluation was carried out in 2020. Please
see pages 64 and 76 for further details.
The Committee will focus on wider workforce
policies
The Committee approved the remuneration package for:
– Group Chief Executive Officer
– CEO Europe
– Chief Human Resources Officer
– Chief Information Officer.
New appointments and changes to the Group
Executive Team will be reviewed and approved by
the Committee
Governance
The external advisors updated the Committee on governance
and remuneration trends.
The Committee will continue to monitor investor
views on the remuneration landscape
The Committee reviewed and approved the disclosures for the
pay scenarios and impact of share price appreciation.
The appropriateness of any ESG metrics will be
considered by the Committee during 2021
86
Inchcape Annual Report and Accounts 2020
Single total figure of remuneration (audited)
The table below sets out the total remuneration received by the Directors for the year ended 31 December 2020:
Base salary
/fees(a)
£’000
Taxable
benefits(b)
£’000
Single-year
variable(c)
£’000
Multiple-year
variable(d)
£’000
Pension(e)
£’000
Other(f)
£’000
Total
£’000
Total
Fixed(a+b+e+f)
£’000
Total
variable(c+d)
£’000
2019
2020
2019 2020
2019 2020
2019 2020
2019 2020
2019
2020
2019
2020
2019
2020
2019
–
3
–
169 194 100
0
–
0 115
0
0
321
73
60
67
77
74
–
2
–
–
–
–
–
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
46
49
–
17
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3
3
–
–
–
–
–
–
–
–
0
468
707
–
401
468
707
–
286
0
–
0 115
–
–
–
–
–
–
–
279
70
55
67
65
63
48
322
73
60
67
77
74
–
279
70
55
67
65
63
48
322
73
60
67
77
74
-
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2020
Name
Current Executive
Directors
Duncan Tait*
Gijsbert de Zoeten
Current Non-Executive
Directors
Nigel Stein
Jerry Buhlmann
Rachel Empey
Jane Kingston
John Langston
Till Vestring
Alex Jensen*
Former Executive
Directors
Stefan Bomhard*
Total
416
461
277
70
55
67
65
63
48
343
757
18
1,865 1,598 209 119
10
0
0
0 115
0 520 114 227
0 520 209 244
4
10
471 1,522
471 1,002
0
0 2,293 2,596 2,293 1,961
0 520
0 635
* Stefan Bomhard left on 30 June 2020. Alex Jensen joined on 29 January 2020 and Duncan Tait joined on 1 June 2020.
a. Base salary/fees include the voluntary 20% pay cut taken by the Directors during the year.
b. Taxable benefits comprise car allowance, medical cover and mileage allowance. Gijsbert de Zoeten received a relocation allowance of £173,904 during 2020. As disclosed
in last year's report, Gijsbert was eligible for a relocation allowance to facilitate moving his family to the UK. The allowance was payable for a 12 month period only.
c. Payment for performance under the annual bonus, including amounts paid in shares.
d. The 2019 figure for Stefan Bomhard has been revised from last year’s report to reflect the share price on the date of vesting (valued using the market price at the date of
vesting of 491p and 489p for the 2017 PSP and CIP awards respectively) and includes a dividend equivalent of £43,366. The 2019 value includes a movement of --£312,168
which was due to a reduction in share price over the period. Full details of the awards exercised in 2020 are given on page 92.
e. During the year Stefan Bomhard received a cash pension supplement of 30% of base salary prior to 21 May 2020, and 23.3% thereafter until date of leaving. Gijsbert de Zoeten
and Duncan Tait received a pension supplement of 10% of salary.
f. The 2020 figure for both Duncan Tait and Gijsbert de Zoeten includes the value of the 2020 SAYE and is based on the embedded value at date of grant. In 2020, Stefan Bomhard
received a one-off payment of £4,391.10 in lieu of holiday entitlement at time of leaving.
The fees of the Chairman, Non-Executive Directors and the Senior Independent Director are given on page 88.
Base salary
Salaries are reviewed annually and typically take effect from 1 April each year. The Committee agreed to postpone the 2020 salary
increases as part of the Group COVID-19 response. Additionally, Board members agreed to take a 20% salary or fee cut, applied for
three months for the Executive Directors and nine months for Non-Executive Directors.
The quantum of total executive remuneration was reviewed against four comparator groups: retailers, distributors, companies of a
similar market cap, and companies with similar revenues.
The salaries for 2019, 2020 and 2021 are set out below, together with the average increases across the Group.
Name
Duncan Tait
Gijsbert de Zoeten*
Average increase across Group
1 April 2019
(or date of appointment, if later)
1 April 2020
–
£485,000
2.43%
£780,000
£499,550
3.18%
1 April 2021
£799,500
£518,533
3.28%
* Gijsbert de Zoeten was awarded a salary increase of 3% in April 2020 but implementation was delayed until January 2021. He was awarded a salary increase of 3.8% with
effect from 1 April 2021. Further details are on page 76.
Inchcape Annual Report and Accounts 2020
87
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Corporate governance report – Remuneration continued
Chairman and Non-Executive Directors’ fees
The Remuneration Committee agreed an increase of 2.5% p.a. for the Chairman’s fee with effect from 1 April 2021. The Chairman’s
fee will be £334,560 p.a. from that date.
The Board agreed a fee increase of 2.5% p.a. for the Senior Independent Director and Non-Executive Directors with effect from 1 April
2021. The revised fees will be £83,025 for the SID, and £63,500 for the NEDs. The additional fee of £15,000 p.a. for the chair of the
Audit and Remuneration Committees, and £12,000 for the chair of the CSR Committee remain the same.
Annual bonus
The annual bonus is based on annual financial measures and strategic objectives. The measures are selected to incentivise
sustainable growth and the financial matrix is designed to provide a balanced focus between commercial and cash initiatives. The
strategic objectives are selected each year to reinforce the Group’s strategic priorities and may include personal objectives linked
to the delivery of the Ignite strategy.
The principles for setting the framework are such that it:
– Drives the desired behaviours underpinned by our performance drivers
– May be easily cascaded through the organisation to reinforce alignment of our collective goals
– Has clear measures and targets
2020 bonus
For 2020, 80% of the bonus was based on financial performance via a matrix of revenue and profit before tax with the remaining 20% of
the bonus based on strategic objectives, therefore linking an individual’s bonus outcome to their contribution to the Ignite strategy.
The maximum opportunity was 150% of salary which is payable for achieving stretch performance against all measures.
The structure of the 2020 bonus
Up to 80% of total bonus or 120% of salary is earned according to the following matrix of financial measures
(% are of salary):
Revenue
Stretch
Target
Threshold
24%
16%
12%
72%
48%
36%
Threshold
Target
Profit before tax
120%
96%
72%
Stretch
Up to 20% of the total bonus, or 30% of salary, is earned for the achievement of strategic objectives linked to the Ignite strategy.
88
Inchcape Annual Report and Accounts 2020
Actual performance against bonus targets
Achievement of financial targets (80% of total bonus or 120% of salary)
In 2020, revenue performance and profit before tax was below threshold. The table below provides further detail on the revenue
and profit before tax targets.
Actual performance for determining bonus outcomes has been calculated using the same currency rates as used to set the bonus
targets, and both targets and performance have been determined on an IFRS 16 basis. This approach helps ensure that the bonus
is linked to underlying financial performance.
Measure
Revenue
Profit before tax
Targets
Threshold
£8,065.0m
£273.9m
Target
Stretch
Actual performance
£8,489.5m
£304.3m
£8,914.0m
£334.7m
£7,036.4m
£135.7m
Outcome for element of bonus
% of salary
0%
Adjustments made during the year
The revenue and profit before tax targets for 2020 were adjusted to take into account strategic acquisitions and disposals during the
year, to ensure target and performance outcomes were assessed on a like-for-like basis.
Achievement of strategic targets (20% of total bonus, or 30% of salary)
Below we provide as much detail as commercially appropriate on the objectives linked to the strategic part of the 2020 bonus and
the resulting outcomes. As the financial performance targets were not achieved there is no bonus payable for the year ended 31
December 2020, however, the Executive Directors achieved the strategic objectives as detailed below.
Executive Director Objective
Duncan Tait
Strategy
Weighting (%)
10%
Further details on objectives
– Defined the new strategic direction of the Group focusing
Weighted
outcomes (%)
n/a
Digital
capability
Gijsbert de Zoeten
Improve
management
information flow
10%
on two key growth pillars:
Distribution Excellence; and
Vehicle Lifecycle Services
– Successfully maintained strategic progress during
COVID-19 pandemic
10%
– Successful roll out of omni-channel platform in Argentina,
Colombia and Chile with staggered implementation
plan agreed for other markets.
– Improvement in executive information resulting in:
a) highly effective navigation through COVID-19 crisis;
and
b) increased quality of information on business
performance between regions and central functions
including frequency, improvement in forward looking
data and market detail.
n/a
n/a
Finance and IT
transformation
10%
– A comprehensive transformation plan of the Finance
n/a
function was created, and the first milestones have been
achieved despite the challenges presented by
COVID-19. Significant improvement of Finance IT tools
globally and initiation of shared services project.
– Substantial progress on the Cyber Security action plan.
Inchcape Annual Report and Accounts 2020
89
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Corporate governance report – Remuneration continued
Annual bonus for 2021
The maximum annual bonus opportunity in 2021 will remain unchanged from previous years and will be 150% of salary. For the
Executive Directors, 80% of the bonus will be based on a financial performance matrix, linked to revenue and profit before tax, and
20% of the bonus will be based on a basket of specific, measurable objectives that relate to the Group’s strategy. For target
performance, the payout will be 50% of the maximum bonus opportunity.
The structure of the 2021 bonus
Up to 80% of total bonus or 120% of salary is earned according to the following matrix of financial measures
(% are of salary)
Revenue
Stretch
Target
Threshold
24%
16%
12%
72%
60%
36%
120%
96%
72%
Threshold
Target
Stretch
Profit before tax
Given the close link between performance targets, the longer-term strategy, and the advantage this may give competitors, the 2021
targets for the Executive Directors are not disclosed in this report because of their commercial sensitivity. The Committee intends to
publish the financial targets and provide more details of the strategic measures in next year’s DRR.
PSP and CIP awards vesting in respect of the year
In 2018, awards were granted under the PSP and CIP schemes which vested dependent on certain performance targets measured
over three years to 31 December 2020. These awards are also subject to an additional post-vest two-year holding period.
2018 PSP/CIP performance targets
Three-year EPS growth p.a. (60% weighting)
Less than 4%
4%
12%
Between 4% and 12%
* Targets have been adjusted for IFRS 16.
Vesting %
Three-year average ROCE* (40% weighting)
0%
25%
100%
Straight line basis
Less than 16.5%
16.5%
20.5%
Between 16.5% and 20.5%
Unexpired term
0%
25%
100%
Straight line basis
Vesting of 2018 PSP/CIP awards
Over the 2018-2020 performance period an EPS growth of -63% and three-year average ROCE of 19% were achieved, which resulted
in the following vesting outcomes:
Award
PSP
Total (overall vesting outcome of PSP)
Award
CIP
Total (overall vesting outcome of CIP)
Performance measure
EPS
ROCE
Performance measure
EPS
ROCE
Wtg.
60%
40%
Wtg.
60%
40%
Vesting outcome (% of element)
0%
71.3%
28.5%
Vesting outcome (% of element)
0%
71.3%
28.5% = 0.57:1 match
Due to their relatively recent appointments, neither of the Executive Directors were participants in the 2018 PSP/CIP award cycle.
The awards granted in 2018 to Stefan Bomhard and Richard Howes (former Directors) lapsed on their cessation of employment with
the Group.
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Inchcape Annual Report and Accounts 2020
PSP and CIP awards granted during the year
During 2020, PSP and CIP awards were granted to Duncan Tait and Gijsbert de Zoeten. PSP awards were granted at 180% and 230%
of salary respectively and under the CIP, Duncan Tait and Gijsbert de Zoeten invested 50% of salary and were granted a matching
award of 100% of salary. As disclosed in last year's report, it was agreed that Gijsbert’s PSP awards would be enhanced to 230% of
salary for 2020 only (versus a regular award of 180%), reflecting that no PSP award was granted to him in 2019.
Due to the share price decline, a 10% reduction was applied to the actual number of shares granted to ensure that the awards
reflected the shareholder experience and alignment with other stakeholders.
The performance targets for the 2020 PSP/CIP grants are as follows:
2020 PSP/CIP
Three-year cumulative EPS (40% weighting)
Less than 169p
169p
191p
Between 169p and 191p
Cash conversion (20% vesting)
Less than 55%
55%
70%
Between 55% and 70%
Vesting %
Three-year average ROCE (40% weighting)
0%
25%
100%
Straight line basis
Less than 16.5%
16.5%
20.5%
Between 16.5% and 20.5%
Unexpired term
0%
25%
100%
Straight line basis
Vesting %
0%
25%
100%
Straight line basis
Threshold level performance will result in 25% of the 2020 PSP and CIP awards vesting.
Duncan Tait
PSP
CIP
Gijsbert de Zoeten
PSP
CIP
Date of grant
Share
price
(p)1
Number of
shares/options
awarded
Face value
at grant2
Performance period
Exercise period
2 June 2020
26 June 2020
514.5p
488.8p
251,342
139,682
£1,293,155
£682,766
Jan 2020 – Dec 2022
Jan 2020 – Dec 2022
Jun 2023 - Jun 2024
Jun 2023 - Dec 2023
2 June 2020
26 June 2020
514.5p
488.8p
199,695
86,841
£1,027,431
£424,479
Jan 2020 – Dec 2022
Jan 2020 – Dec 2022
Jun 2023 - Jun 2024
Jun 2023 - Dec 2023
1. Mid-market share price on date of grant.
2. Face value has been calculated using the share price at date of grant.
Long-term incentives for 2021
Given the current uncertainty in our core markets as a result of recent local and national lockdowns, the Committee has delayed
setting the targets for the 2021 awards. The current intention is to make the awards in May and the specific targets applying to the
awards will be disclosed to shareholders in an RNS at the time of grant.
Pension
During 2020, the outgoing CEO, Stefan Bomhard, received a cash supplement of 30% of base salary to 21 May 2020. He then
received a cash supplement of 23.3% of salary until he left the Group on 30 June 2020. Duncan Tait and Gijsbert de Zoeten receive
a pension contribution of 10% of salary which is aligned to the UK employee average.
Inchcape Annual Report and Accounts 2020
91
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Corporate governance report – Remuneration continued
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 2020.
Duncan Tait
Gijsbert de Zoeten
Nigel Stein
Jerry Buhlmann
Rachel Empey
Jane Kingston
John Langston
Till Vestring*
Alex Jensen
Stefan Bomhard**
Share awards held
Options held
Shares held at
31 December
2020
Subject to
performance
conditions
Subject to
deferral
Not subject to
performance
targets
Subject to
deferral
Vested but
not yet
exercised
Guideline met
55,055
68,156
66,834
15,000
6,760
3,500
8,303
46,547
0
485,507
391,024
286,536
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0
0
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0
0
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
4,774
4,774
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0
0
0
n/a
n/a
n/a
n/a
n/a
n/a
n/a
40,252
No
No
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
* Till Vestring’s shares were mis-stated last year, shares held at 31 December 2019 were 44,308.
** Shares and awards held by Stefan Bomhard on his date of leaving 30 June 2020.
There have been no changes to the number of shares held by the Directors between 31 December 2020 and 24 February 2021.
Share ownership policies
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.
Duncan Tait and Gijsbert de Zoeten held 49% and 97% of salary respectively as at 31 December 2020, using the share price as at
31 December 2020 of 643.5p.
Awards exercised during 2020
Stefan Bomhard exercised the award granted to him under the 2017 Performance Share Plan on 27 May 2020. He sold sufficient
shares to cover costs and tax and retained the remaining shares.
Plan
PSP
Shares exercised
Dividend shares
60,393
5,491
Share price
499.9p
Shares sold
31,028
Shares retained
34,856
Percentage change in Board remuneration
The table shows the percentage change in Board remuneration from 2019 to 2020 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.
Duncan Tait
Gijsbert de Zoeten
Nigel Stein
Jerry Buhlmann
Rachel Empey
Jane Kingston
John Langston
Till Vestring
Alex Jensen
Average pay based on senior management
Salary
n/a
3%1,2
2%1,2
0%2
0%2
0%2
0%2
0%2
0%2
3.16%1,2
Benefits
Annual Bonus
n/a
0%3
0%
n/a
n/a
n/a
n/a
n/a
n/a
0%
n/a
- 100%4
n/a
n/a
n/a
n/a
n/a
n/a
n/a
- 82.91%5
1. Change in salaries and fees are shown as difference between position at April 2019 against April 2020 when scheduled annual reviews take place.
2. As noted on page 87, the implementation of April 2020 salary increases was deferred to January 2021. Additionally, the Board and the majority of the management took
voluntary reductions to their fees/salaries.
3. Gijsbert de Zoeten’s relocation allowance provided on appointment for a defined period ceased in 2020.
4. Gijsbert de Zoeten received a prorated bonus for time spent in service in FY2019 and nil bonus for FY2020.
5. In line with performance outcomes for FY2020, limited bonus payments were made for this year.
As Inchcape plc has no direct employees, employees representing the most senior executives 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.
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Inchcape Annual Report and Accounts 2020
CEO pay ratio
The CEO pay ratio is based on comparing the CEO’s pay to that of Inchcape’s UK-based employee population, a large proportion
of whom are in customer-facing roles in retail outlets with remuneration which is commission-driven. The Committee anticipates that
the ratios are likely to be volatile over time, largely driven by the CEO’s incentive outcomes which are dependent on Group-wide
results whereas employee pay variability will be primarily driven by UK market conditions.
The ratio has declined year-on-year due to the reduction in the reportable remuneration for the role of Chief Executive Officer in 2020;
the figure reflects the part-year earnings for Stefan Bomhard and Duncan Tait, neither of whom received any variable pay for 2020.
As a substantial proportion of the CEO’s total remuneration opportunity is derived from variable pay, the Committee expects the
ratio is likely to increase over time as full-year earnings are reported for the CEO and performance merits pay-outs under the bonus
and PSP/CIP.
Financial year
2020
2019
Calculation methodology
P25 (Lower quartile)
P50 (median)
P75 (Upper quartile)
C
C
40:1
67:1
28:1
48:1
19:1
32:1
Consistent with 2019, calculation methodology C was used. Full-time equivalent remuneration was calculated for all UK employees
using the single total figure valuation methodology with two amendments: using 2019 bonus outcomes as a proxy for 2020 bonus
outcomes and excluding SAYE grants. The employees at the 25th, 50th and 75th percentile (P25, P50, P75) were identified. The total
remuneration for 2020 of the three employees identified was then updated after the year-end to include any annual bonus and
SAYE values (if applicable). This method was chosen as it is in line as much as possible with methodology A which is the
government’s preferred approach whilst taking account of operational constraints. The Committee is satisfied that the selected
employees are representative.
The table below sets out the remuneration details for the individuals identified:
Year
2020
2019
Salary
Basic salary (£’000)
Total remuneration1 (£’000)
Basic salary (£’000)
Total remuneration1 (£’000)
1. Reflects part-year earnings for Stefan Bomhard and Duncan Tait.
CEO
£759
£939
£757
£1,639
P25
£23
£24
£15
£24
P50
£32
£33
£28
£34
P75
£34
£49
£28
£52
The Committee is satisfied that the overall picture presented by the 2020 pay ratios is consistent with the reward policies for
Inchcape’s UK employees. The Committee takes into account these ratios when making decisions around the Executive Director
pay packages, and Inchcape takes seriously the need to ensure competitive pay packages across the organisation.
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 Investment Association.
Issued share capital as at 31 December 2020
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
393m
39m
20m
20m
6m
Relative importance of spend on pay
The chart shows the percentage change in total employee pay
expenditure and shareholder distributions (i.e. dividends and
share buybacks) from 2019 to 2020.
Relative importance of spend on pay (£M)
(-19.7%)
£639.0
£513.0
Employee
remuneration
(-100.0%)
£110.5
£0
Dividend
2019
2020
(-68.6%)
£100.0 £31.4
Share buyback
The Directors are proposing a final dividend for 2020 of 6.9p
per share. (Due to the effects of COVID-19, the Directors
decided to preserve cash and rescinded the recommendation
for the payment of a final dividend for the year ended
31 December 2019.)
Inchcape Annual Report and Accounts 2020
93
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate governance report – Remuneration continued
Pay for performance
The graph below shows the Total Shareholder Return (TSR) of the Company over the 10-year period to 31 December 2020.
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 10 years to 31 December 2020.
Value of £100 invested at 31 December 2010
350
300
250
200
150
100
50
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Inchcape
FTSE mid 250 excluding investment trusts
CEO single figure of
remuneration (£’000)
Annual bonus outcome
(% of maximum)
LTI vesting3 outcome
(% of maximum)
Group Chief Executive
2011
2012
2013
André Lacroix
Stefan Bomhard
Duncan Tait
2,993
n/a
n/a
2,165
n/a
n/a
4,400
n/a
n/a
2014
5,265
n/a
n/a
2015
2941
2,906
b/a
2016
2017
2018
2019
n/a
1,403
n/a
n/a
3,006
n/a
n/a
2,430
n/a
n/a
1,522
n/a
2020
n/a
4712
468
52%
68%
48%
100% 56.8% 40.3% 67.6% 38.5%
n/a6
0 %
100% 100%
66%
68%
n/a4
n/a5 79.6%
58%
40%
n/a7
1. The amount for André Lacroix reflects remuneration received until he left the Group in March 2015.
2. The amount for Stefan Bomhard reflects remuneration received until he left the Group in June 2020.
3. LTI includes CIP, ‘normal’ PSP, ‘enhanced’ PSP and options prior to 2013.
4. Neither André Lacroix nor Stefan Bomhard received a vested award under the 2013 PSP or CIP. However, for those participants who did receive an award, 65.5% of the 2013
normal PSP vested and there was a 1.31 match for each share invested into the 2013 CIP.
5. Stefan Bomhard did not receive an award under the 2014 PSP or CIP. However, for those participants who did receive an award, 86.5% of the normal PSP vested and there
was a 1.73:1 match for each share invested into the CIP.
6. Stefan Bomhard did not receive a bonus in 2019.
7. Neither Stefan Bomhard nor Duncan Tait received a vested award under the 2018 PSP or CIP. However, for those participants who did receive an award, 28.5% of the 2018
PSP vested and there was a 0.57:1 match for each share invested into the 2018 CIP.
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Inchcape Annual Report and Accounts 2020
Advisors to the Committee
Mercer|Kepler, a brand of Mercer (and part of the MMC group),
acted as the independent remuneration advisor to the
Committee until 31 December 2020. Mercer|Kepler was
appointed by the Committee in 2010 after a comprehensive
tendering process carried out by the Committee. Mercer|Kepler
was paid fees of £76,804 for its services during the year,
excluding expenses and VAT. Mercer also supplied unrelated
services to the Group in relation to IAS 19. Following the lead
advisor moving to Ellason LLP, Ellason LLP was appointed as the
independent remuneration advisor to the Committee effective
1 January 2021.
Mercer and Ellason are both signatories to the Remuneration
Consultant Group’s Code of Conduct which sets out
guidelines to ensure that any advice is independent and
free of undue influence (which can be found at
www.remunerationconsultantsgroup.com). None of the
individual Directors have a personal connection with Mercer
or Ellason. The Committee is satisfied that the advice it receives
is objective and independent and confirms that neither
Mercer|Kepler nor Ellason have any connection with the
Company that may impair their independence. The
Committee’s advisors attend Committee meetings as required
and provide advice on remuneration for executives, analysis of
the remuneration policy and regular market and best practice
updates. The advisors report directly to the Committee Chair.
Fees are charged at an hourly rate in accordance with the
terms and conditions set out in the relevant engagement letter.
The Directors’ Report on Remuneration was approved by the
Board and has been signed by Jane Kingston on its behalf.
Jane Kingston
Chair of the Remuneration Committee
Shareholder context
The table below shows the advisory vote on the Remuneration
Report at the 2020 AGM:
For (including discretionary)
Against
Total votes cast (excluding votes
withheld)
Votes withheld1
(Total votes cast including votes
withheld)
% of
votes cast
84.10%
15.90%
100%
Total number of votes
277,213,236
52,429,638
329,642,874
17,159,945
346,802,819
The Committee recognises the vote on the Remuneration
Report at the 2020 AGM was lower than in previous years and
has considered the reasons why shareholders voted against
the Remuneration Report.
Reasons for voting against include the level of disclosure in the
Report. This year, the Committee has reviewed all its disclosures
in detail to ensure they meet the standards required by
shareholders. The Committee will continue to keep an open
dialogue with shareholders to help ensure support for
remuneration decisions is strong.
The table below shows the binding vote on the remuneration
policy at the 2020 AGM:
For (including discretionary)
Against
Total votes cast (excluding votes
withheld)
Votes withheld1
(Total votes cast including votes
withheld)
% of
Total of votes
votes cast
323,620,872
18,822,513
94.50%
5.50%
342,443,385
4,359,434
100%
346,802,819
1. Withheld votes are not included in the final proxy figures as they are not
recognised as a vote in law.
Exit payments during the year
No exit payments were made to Directors during the year.
Stefan Bomhard left the Group on 30 June 2020 after serving
five months of his 12 month notice period. He received no
further payments upon leaving, he did not receive a bonus for
2020 and all his outstanding PSP and CIP awards (i.e. those
granted in 2018 and 2019) lapsed in full.
Payments to past Directors
No payments were made to past Directors in 2020.
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 and is approved
in advance by the Nomination Committee and the Board.
Gijsbert de Zoeten is a member of the supervisory board of
Technical University Delft, for which he received a fee of €17,000
during 2020.
Duncan Tait currently serves as a non-executive director on the
board of Agilisys Ltd for which he received a fee of £25,000
during 2020.
Inchcape Annual Report and Accounts 2020
95
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Directors’ Report
Directors’ Report
The Directors’ Report for the year ended 31 December 2020
comprises pages 96 to 100 of this report (together with sections
incorporated by reference). Information required in the
Management Report under DTR 4.1.8R can be found in the
following sections: a review of the business and future
developments on pages 2 to 32; principal risks and
uncertainties on pages 41 to 50; a description of the Group’s
internal control framework is given on pages 56 and 57; a
description of the Board’s activities and the structure of its
Committees is given on pages 52 to 95.
Corporate governance statement
The statement of compliance with the 2018 UK Corporate
Governance Code is given on page 56. The Code is
published on the Financial Reporting Council’s website
www.frc.org.uk. Information required under DTR 7 is given in
the Corporate Governance Report on pages 52 to 95.
Board of Directors
The Directors of the Company who were in office during the year
and up to the date of signing the financial statements were:
Stefan Bomhard – left 30 June 2020
Jerry Buhlmann
Gijsbert de Zoeten
Rachel Empey
Alexandra Jensen – joined 29 January 2020
Jane Kingston
John Langston
Nigel Stein
Duncan Tait – joined 1 June 2020
Till Vestring
In accordance with the 2018 UK Corporate Governance Code,
all Directors will stand for election or re-election at the Annual
General Meeting (AGM) on 27 May 2021. The Chairman has
reviewed the performance of each Director and is satisfied that
each continues to be effective and demonstrates commitment
to the role. The appointment and replacement of Directors is
governed by the Company’s Articles of Association (the
Articles), the UK Corporate Governance Code, the Companies
Act 2006 and related legislation.
Subject to the Articles, the UK Corporate Governance Code
and relevant legislation, the business of the Company is
managed by the Board which may exercise all the powers of
the Company.
Shareholders
Engaging with our shareholders is important to the Company so
that we are able to understand their views on the business and
the key issues of importance to them. Any updates regarding
the business, including presentations by the CEO, are available
on the Group’s website so that all shareholders have access to
the same Company information at the same time.
As the top 20 shareholders own over 70% of the business,
shareholder consultations, such as the remuneration policy
approved in 2020, are carried out with this group. Extending the
consultation to all shareholders would not be cost effective,
and shareholders not involved in the consultation process are
encouraged to use the AGM forum to express their views either
by asking questions or voting on the relevant resolutions.
During 2020, shareholders were unable to attend the AGM in
person due to the ongoing COVID-19 restrictions. A dedicated
email was set up to allow shareholders to contact the Board
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Inchcape Annual Report and Accounts 2020
members with any questions. This resource will remain in place
to allow all shareholders to engage with the Company on any
matters of interest to them.
Webcasts are held with the CEO and CFO following the release
of any financial results with analysts and investors invited to
attend. Details of how to join will be available on the
Company’s website prior to the event.
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 conflicted 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.
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 brought by the
Company, judgment is given against the Director. The
indemnity has been in force for the financial year ended 31
December 2020 and until the date of approval of this report.
Results and dividends
The Group’s audited consolidated financial statements for the
year ended 31 December 2020 are shown on pages 112 to
187. The level of distributable reserves is sufficient to pay
a dividend.
The Board recommends a final ordinary dividend of 6.9p per
ordinary share. If approved at the 2021 AGM, the final ordinary
dividend will be paid on 21 June 2021 to shareholders
registered in the books of the Company at the close of business
on 14 May 2021.
The Company may, by ordinary resolution, declare a dividend
not exceeding the amount recommended by the Board.
Subject to the Companies Act 2006, the Board may pay interim
dividends when the financial position of the Company, in the
opinion of the Board, justifies its payment. See page 23 for more
information on the dividend policy.
Share capital
As at 31 December 2020, the Company’s issued share capital
of £39,327,439 comprised 393,274,393 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 on 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 2020, the Company was
authorised to make market purchases of up to 39,860,597
ordinary shares (representing approximately 10.0% of its issued
share capital).
In the year ended 31 December 2020, the Company
purchased for cancellation, 5,858,343 ordinary shares of 10.0p
each at a cost of £31.4m, representing 1.5% of the issued share
capital as at that date as part of the share buyback
programme announced in February 2020. The programme was
cancelled in March 2020 due to COVID-19.
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.
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
George Horesh
Standard Life
Aberdeen plc
Norges Bank
Number of
shares
Date
notified
Percentage
notified
25,842,484
11/01/2021
6.57%
36,807,638
11,751,536
23/11/2020
26/08/2020
9.36%
2.99%
Source TR-1 notifications. These are updated on the Company’s website.
Restrictions on voting rights
There are no restrictions on voting rights.
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 2020, the Trust’s shareholding totalled
167,312 ordinary shares.
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, including family
interests, in the ordinary shares of the Company of the persons
who were Directors at 31 December 2020 is shown in the
Directors’ Report on Remuneration on page 92.
There have been no changes to the number of shares held by
Directors between 31 December 2020 and 24 February 2021.
1
2
4
5
6
7
8
9
10
11
12
13
14
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 apart from certain of
the Group’s third-party funding arrangements which would
terminate upon a change of control of the Company, such as
the Group’s revolving credit facility agreement. Further details
are given in note 23 of the financial statements on page 159.
The Group’s relationships with its OEM brand 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 2020, or was entered into during
the year for any Director and/or connected person (2019:
none).
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
94 (TSR graph)
Details of long-term incentive schemes
90 – 91
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 waiver of dividends
Shareholder waiver of future dividends
Not applicable
Not applicable
Not applicable
Not applicable
97
97
Agreements with controlling shareholders Not applicable
Inchcape Annual Report and Accounts 2020
97
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Directors’ Report continued
Greenhouse gas emissions
As a distributor and retailer 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 for ways in which to minimise our footprint. Data is collected for three key
performance indicators:
– Energy – our global gas and electricity usage.
– Transport – the 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.
– Travel – the movement of our people.
Methodology
The methodology used to calculate the Group’s greenhouse gas emissions is based on the GHG Protocol Corporate Accounting
and Reporting Standard, and Mandatory Greenhouse Gas Reporting in line with HM Government guidance. The methodology uses
conversion factors as published by the Department for Business, Energy and Industrial Strategy in 2020 and international electricity
emission factors as published in the International Energy Agency’s ‘CO2 Emissions from Fuel Combustion (2020 edition)’.
Data collection and reporting period
Data has been collected for all markets from 1 January 2020 to 31 December 2020. The level at which we report is by business unit
for each market. This covers our Retail operations, Distribution operations and business service operations, which fall within our
operational control boundary.
Intensity ratio
The Group’s intensity ratio is revenue per tonne of CO2e. This allows for a fair comparison over time of CO2e emissions given the
growth trajectory envisaged for the Group and cyclical variations in business activity.
Total greenhouse gas emissions in 2020
Scope 1 and 2 emissions
Scope 1 (Direct emissions from combustion of fuels and operation of facilities)
Scope 2 (Electricity, heat, steam and cooling purchased for own use)
Total Scope 1 and 2 emissions
Total emissions (tonnes CO2e)
Year ended
31 Dec 2020
Year ended
31 Dec 2019
Change in
emissions
8,780
41,179
49,959
7,033
49,959
7.1
10,744
46,629
57,374
9,391
57,374
6.1
-18%
-12%
-13%
-25%
-13%
16%
Methodology
Our carbon footprint is calculated by gathering monthly and
quarterly energy consumption data. Emission factors used are
a combination of BEIS 2020 emission factors and IEA grid mix
factors for specific markets.
Energy efficiency measures
During the reporting period, no new energy efficiency actions
have been taken however our energy management
programme is ongoing, including monitoring and targeted
reporting of energy consumption on a daily basis at the majority
of sites. Through the service provided by our energy consultants,
the energy management programme we run enables us to
identify and address any consumption issues as and when they
arise, allowing us to eliminate unnecessary energy waste.
Employees and employee involvement
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.
Operational emissions intensity
Intensity metric – total revenue (£m)
Total Scope 1 and 2 emissions (tonnes CO2e)
Scope 1 and 2 emissions per £m (tCO2e/£m)
COVID-19
Due to the impact of COVID-19 during 2020, many of our
businesses were required to close. This has resulted in a
dramatic reduction in the energy used in the year and as
markets return to more normalised operating activities the
energy used is likely to increase.
Streamlined Energy and Carbon Reporting
Regulations (”SECR”)
As required under the SECR regulations the following information
relates to the energy consumed in our UK operations.
UK energy use (kWh)
Associated GHG emissions (tCO2e)
Emissions from activities which the company
own or control including combustion of fuel &
operation of facilities (scope 1) (tCO2e)
Emissions from the purchase of electricity,
heat, steam, cooling purchased for own use
(scope 2 – location-based) (tCO2e)
Total energy used to calculated above
emissions (kWh)
Intensity ratio: tCO2e (gross scope 1+2)/
intensity metric
Year ended
31 Dec 2020
42,598,398.63
8,780
41,179
49,959
142,111,220.52
7.1
98
Inchcape Annual Report and Accounts 2020
Our performance and talent framework, DRIVE5, sets
performance expectations, behaviours and values for our
people. It was developed using inputs from colleague and
customer focus groups and incorporates our OEM brand
partners’ existing frameworks of skills and behaviours to ensure
that we can deliver against our stakeholders’ expectations in
support of our ambition to be the world’s most trusted
distributor and retailer.
The Company has various employee policies in place covering
a wide range of issues such as family friendly policies,
employment rights and equal opportunities. Policies are
implemented at a local level and comply with any relevant
legislation in that market. All policies are available on the
Group’s intranet and compliance is monitored at local level.
The Group’s bonus and long-term incentive schemes are
designed to encourage involvement in the Company’s
performance. UK employees are eligible to join the SAYE
scheme, which is offered annually. Further details can be found
in the Directors’ Report on Remuneration on pages 78 to 79.
Employee communication
Townhall meetings are held in each market on a regular basis
and also following the release of any financial updates by the
Company. The townhall meetings provide employees with
information on the Group’s performance and provide an
opportunity for consulting employees on new initiatives or other
matters that concern them. The Group’s global intranet,
iConnect, also provides a means of communicating important
issues to employees.
The Employee Experience Survey is the primary tool for
obtaining the views of employees and the results of the survey
are reported to the CSR Committee on an annual basis. The
chair of the CSR Committee is the designated Director for
communicating the views of employees to the Board and he
reports the findings to the Board following each meeting.
The consultation enables the Board to gain an understanding
of how the employee experience is perceived and what
actions can be taken to enhance this experience so
employees feel challenged, excited, engaged and supported
in their roles.
Further details can be found in the CSR Report on page 72.
Diversity
The breakdown of 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 2020 is
as follows:
Male
Board
Senior
All employees
6 66.7%
57 82.6%
73%
10,878
Female
3
12
3,887
33.3%
17.4%
26.3%
Total
9
69
14,765
The Nomination Committee is responsible for succession
planning on the Board and as such considers the
recommendations of the Hampton-Alexander Review and
Parker Review as part of the recruitment process. The Board has
decided not to set targets and has achieved the
recommendation of 33% female representation by 2020 as
recommended by the Hampton-Alexander Review.
The Nomination Committee ensures that a broad mix of
suitable candidates is put forward for consideration for
vacancies. Management are also focusing on diversity as part
of the talent planning process to strengthen diversity within the
talent pipeline. The Diversity Policy Statement is given on
page 64.
Principal financial risk factors
These risks are shown on pages 41 to 50.
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 24 to the financial statements on pages 161 to 168.
Branches outside the UK
The Company does not have any branches outside the UK.
Events after the reporting period
None.
Political donations
The Company did not make any political donations in 2020
and does not intend to make any political donations in 2021.
Directors’ responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable
law and regulation.
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 (IFRSs) as
adopted by the European Union and parent company
financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 “Reduced
Disclosure Framework”, and applicable law). 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 parent company and of the
profit or loss of the Group and parent company for that period.
In preparing the financial statements, the Directors are
required to:
– select suitable accounting policies and then apply them
consistently;
– state whether applicable IFRSs as adopted by the European
Union have been followed for the Group financial statements
and United Kingdom Accounting Standards, comprising FRS
101, have been followed for the Company financial
statements, subject to any material departures disclosed and
explained in the financial statements;
– make judgements and accounting estimates that are
reasonable and prudent; and
– prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and
parent company will continue in business.
Inchcape Annual Report and Accounts 2020
99
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Culture
The Board monitors the culture of the Company by reviewing
reports received from the whistleblowing line, Speak Up!, via
reporting to the Audit Committee, reviewing the employee
voice via the results of the Employee Experience Survey, which
is monitored by the CSR Committee, and reviewing the number
of employees who have undertaken the Code of Conduct
training. The Board also carries out an annual global talent and
leadership review as part of its succession planning activities
which enable the monitoring of key metrics such as internal
promotions and development programmes. The Remuneration
Committee considers wider pay and practices when reviewing
Executive remuneration and has an annual update on
remuneration practices which allows it to assess whether they
drive the right behaviours within the businesses in accordance
with the DRIVE5 performance drivers, see page 99.
Going concern
Having assessed the principal risks and the other matters
discussed in connection with the viability statement on
page 50, the Directors consider it appropriate to adopt the
going concern basis of accounting in the financial statements
for the next 12 months.
Auditor and disclosure of information to the auditor
The auditor, Deloitte LLP, has indicated its willingness to
continue in office. A resolution to reappoint Deloitte as auditor
will be proposed at the AGM.
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.
Annual General Meeting
The AGM will be held at 11.00 a.m. on Thursday, 27 May 2021
at The Royal Automobile Club, 89 Pall Mall, London SW1Y 5HS.
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 Directors’ Report was approved by the Board and has been
signed by the secretary of the Company.
Tamsin Waterhouse
Group Company Secretary
Directors’ Report continued
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
parent company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Group and
parent company and enable them to ensure that the financial
statements and the Directors’ Remuneration Report comply
with the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
The Directors are also responsible for safeguarding the assets of
the Group and parent company 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 parent company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
The Directors consider that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess
the Group and parent company’s performance, business
model and strategy.
Each of the Directors, whose names and functions are listed in
Board of Directors, confirm that, to the best of their knowledge:
– the parent company financial statements, which have been
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law), give a true and fair view
of the assets, liabilities, financial position and loss of the
Company;
– the Group financial statements, which have been prepared
in accordance with IFRSs as adopted by the European Union,
give a true and fair view of the assets, liabilities, financial
position and profit of the Group; and
– the Directors’ Report includes a fair review of the
development and performance of the business and the
position of the Group and parent company, together with
a description of the principal risks and uncertainties that
it faces.
The Directors considered the key messages contained in the
Strategic Report along with the disclosures made throughout to
ensure that they are consistent, transparent and a true
reflection of the business. The Directors also reviewed
supporting documentation which addresses specific
statements made in the report and the evidence to support
those statements.
Following this review, the Directors consider, when taken as a
whole, that the Annual Report and Accounts is fair, balanced
and understandable and provides the information necessary
for shareholders to assess the Company’s position and
performance, business model and strategy.
Business relationships
Having positive relationships with our OEM brand partners, our
main suppliers, and our customers is imperative for the
long-term success of the Company. Our OEM brand partner
relationships are key to every part of our value chain and the
length of these relationships, which are given on pages 10 and
11, is testament to this strength.
100
Inchcape Annual Report and Accounts 2020
Financial statements
102 Independent auditor’s report to the members of Inchcape plc
112 Consolidated income statement
113 Consolidated statement of comprehensive income
114 Consolidated statement of financial position
115 Consolidated statement of changes in equity
116 Consolidated statement of cash flows
117 Accounting policies
127 Notes to the financial statements
176 Alternative performance measures
178 Five year record
179 Company statement of financial position
180 Company statement of changes in equity
181 Company accounting policies
184 Notes to the Company financial statements
Other information
197 Shareholder information
Inchcape Annual Report and Accounts 2020 101
Inchcape Annual Report and Accounts 2020 101
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Independent auditor’s report to the members of Inchcape plc
Report on the audit of the financial statements
1. Opinion
In our opinion:
– the financial statements of Inchcape plc (the ‘parent company’) and its subsidiaries (the ‘Group’) give a true and fair view of the
state of the Group’s and of the parent company’s affairs as at 31 December 2020 and of the Group’s loss for the year then ended;
– the Group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRSs) as adopted
by the European Union;
– the parent company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
– the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
– the consolidated income statement;
– the consolidated statement of comprehensive income;
– the consolidated and parent company statement of financial position;
– the consolidated and parent company statements of changes in equity;
– the consolidated statement of cash flows;
– the accounting policies; and
– the related notes 1 to 34 to the consolidated financial statements and the related notes 1 to 14 to the parent company financial
statements.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law,
international accounting standards in conformity with the requirements of the Companies Act 2006 and IFRSs as adopted by the
European Union. The financial reporting framework that has been applied in the preparation of the parent company financial
statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework”
(United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
2.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements
section of our report.
We are independent of the Group and the parent company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to
listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The
non-audit services provided to the Group and parent company for the year are disclosed in note 3 to the financial statements. We
confirm that the non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
102
102
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
3.
Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
– UK goodwill and site impairment
– Central America goodwill and indefinite-life intangible asset impairments
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
The materiality that we used for the Group financial statements was £10.7 million which was determined on
the basis of 1.0% of net assets and equates to 8.3% of profit before tax and exceptional items.
We changed the benchmark used in determining materiality in the current year to net assets from profit
before taxation and exceptional gains and losses on business disposals, impairments and restructuring
costs, which was used in the prior year. Volatility in profit in the current year when compared to previous
years, resulting from the impact of the COVID-19 pandemic on the Group’s operations and consumer
demand in the markets in which the Group operates, was the reason that we have deemed the use of
only a profit based benchmark to be inappropriate in the current year.
Scoping
We conducted our work in 18 countries (2019: 19 countries), with 23 components subject to audit
procedures (2019: 25 components).
The reporting units where we conducted our audit work accounted for 90% of the Group’s revenue (2019:
88%), 90% of the Group’s profit before taxation and exceptional items (2019: 95%) and 90% of the Group’s
net assets (2019: 89%).
Significant changes
in our approach
We identified a ‘Goodwill impairment assessment’ key audit matter in the prior year, focussed on the UK. In
the current year we have identified a ‘UK goodwill and site impairment’ key audit matter, given the
increased judgement relating to the impairment of certain site assets.
As a result of the impact of the COVID-19 pandemic on the performance of the Group and the economic
environment of the markets in which the Group operates we identified increased risk of impairments in
certain cash generating units (CGUs). A new key audit matter was identified in the current year relating
to Central America goodwill and indefinite-life intangible asset impairments as a result of the significant
judgement related to the level of impairment recognised.
In the prior year we had identified a key audit matter relating to disposal accounting as a result of the
Group’s strategy to dispose of a significant number of retail sites and businesses across multiple
geographies; in the current year there is a lower level of accounting complexity and judgement relating
to disposed of sites and therefore we have not identified as a key audit matter.
Given the Group completed its transition to the IFRS 16 ‘Leases’ accounting standard in the prior year,
the ongoing application of the standard does not require the same level of accounting complexity or
judgement, and consequently we have not identified a key audit matter in relation to leases in the
current year.
Inchcape plc Annual Report and Accounts 2019
Inchcape Annual Report and Accounts 2020 103
103
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Independent auditor’s report to the members of Inchcape plc continued
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and parent company’s ability to continue to adopt the going concern
basis of accounting included:
– Understanding the Group’s processes and related controls over the assumptions in the going concern assessment;
– Assessing the Group’s available facilities, with a separate assessment performed on Government assistance (CCFF) and assess
whether this facility is not included in the liquidity headroom as they are not committed facilities;
– Considering the reasonableness of the projections and the appropriateness of the sensitivities performed by management;
– Engaging valuation specialists to perform integrity checks of the going concern model, including checking for mathematical and
clerical accuracy;
– Evaluating the accuracy and completeness of covenants calculation within the model;
– Confirming consistency of the forecasted cash flows with the forecasts prepared for the impairment models;
– Performing additional sensitivity scenario tests; and
– Assessing the disclosures relating to going concern.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group's and parent company’s ability to continue as a going concern
for a period of at least twelve months from when the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of
this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
104
104
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Independent auditor’s report to the members of Inchcape plc continued
4. Conclusions relating to going concern
preparation of the financial statements is appropriate.
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
Our evaluation of the Directors’ assessment of the Group’s and parent company’s ability to continue to adopt the going concern
basis of accounting included:
– Understanding the Group’s processes and related controls over the assumptions in the going concern assessment;
– Assessing the Group’s available facilities, with a separate assessment performed on Government assistance (CCFF) and assess
whether this facility is not included in the liquidity headroom as they are not committed facilities;
– Considering the reasonableness of the projections and the appropriateness of the sensitivities performed by management;
– Engaging valuation specialists to perform integrity checks of the going concern model, including checking for mathematical and
clerical accuracy;
– Evaluating the accuracy and completeness of covenants calculation within the model;
– Confirming consistency of the forecasted cash flows with the forecasts prepared for the impairment models;
– Performing additional sensitivity scenario tests; and
– Assessing the disclosures relating to going concern.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group's and parent company’s ability to continue as a going concern
for a period of at least twelve months from when the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of
this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
104
Inchcape plc Annual Report and Accounts 2020
5.1. UK goodwill and site impairment
Key audit matter
description
How the scope of
our audit responded
to the key audit matter
Account balances: Intangible assets, property, plant and equipment and right-of-use assets. Refer to
the Audit Committee report on page 65, the Critical accounting judgements and sources of
estimation uncertainty in the Accounting policies section on page 117, note 2 Exceptional items on
page 132, note 11 Intangible assets on page 145, note 12 Property, plant and equipment on page
149 and note 13 Right-of-use assets and Lease liabilities on page 151.
At December 2020 the Group has goodwill of £119.0 million (2019: £215.7 million), property, plant and
equipment of £569.8 million (2019: £695.1 million) and right-of-use assets of £257.3 million (2019: £313.3
million). £nil (2019: £80.2 million) of the goodwill, £203.6 million (2019: £262.2 million) of property, plant
and equipment and £73.6 million (£78.6 million) of right-of-use assets relate to the UK.
As a result of the impact of the COVID-19 pandemic, the Group was required to close its dealerships in
the UK for a period of time which severely impacted the Group’s performance in the market. As such,
indicators of impairment were identified prior to the reporting of the Group’s interim results as of 30 June
2020 and an impairment review of the UK goodwill and site assets was carried out at that date.
Impairment reviews of assets at the Group’s sites were performed initially, followed by the UK operation
as a whole, which is the level of aggregation that the associated goodwill is assessed. Management
concluded that the recoverable amount of certain sites was lower than their carrying amount and
recorded impairment charges of £6.4 million against computer software, £29.5 million against property,
plant and equipment and £8.1 million against right-of-use assets. Subsequently an impairment review of
the UK group of CGUs, which is the level at which the goodwill is reviewed, was performed which resulted
in the impairment of the total remaining goodwill amount of £80.2 million.
At 31 December 2020 management performed updated impairment reviews which resulted in the
reversal of £7.9 million of previously recognised property, plant and equipment impairments, offset by the
additional impairment of £0.4 million of right-of-use assets. In accordance with the accounting standards,
once goodwill has been fully impaired no subsequent impairment reviews need to be performed.
The estimation of the recoverable amount requires management to assess the ‘value in use’ of the
individual sites as well as the whole UK operation for goodwill purposes. This is particularly judgemental
due to the forecasting of future cash flow assumptions, and accordingly we determined these to be the
key estimates in management’s determination of the level of impairment charge to record. Given the
impact of the COVID-19 pandemic on consumer confidence, forecasting demand for vehicles and
aftersales services in the short and medium term is particularly uncertain. Further, with the
announcement that the sale of new petrol and diesel vehicles will be banned from 2030, the
electrification of the UK’s car parc adds further complexity to forecasting cash flows. Management also
engaged specialists to assess the fair values of each of its sites which showed indicators of impairment. In
line with the accounting standard, the impaired assets were written down to the higher of its value in use
or fair value less cost to sell.
Our procedures in response to the key audit matter identified included:
– Obtaining an understanding of relevant controls over the preparation and use of cash flow forecasts
used in the impairment reviews;
– Assessing the integrity of the models used by management including reviewing their mechanical accuracy;
– Assessing management’s historical forecasting accuracy by comparing budgets to actuals;
– Benchmarking management’s assumptions against views of internal industry experts, reputable third
party industry growth forecasts, publications, news articles, government legislation and economic data;
– Challenging management’s analysis of the risks and opportunities arising from the transition to electric
vehicles and the impact this has on forecast future cash flows;
– Evaluating the competence, capabilities and objectivity of management’s expert;
– Engaging internal real estate valuation specialists to assist in assessing valuation reports prepared by
management’s expert;
– Engaging internal valuations specialists to independently evaluate the appropriateness of inputs and
methodology used in determining the discount rates used;
– Performing sensitivities in order to challenge the reasonableness of management’s assumptions; and
– Assessing the appropriateness of management’s disclosures.
Key observations
We concluded that the judgements management have made are reasonable.
There are sources of estimation uncertainty which remain, particularly the strength of the recovery in
demand for vehicles and aftersales services after the impact of the COVID-19 pandemic and the risks
and opportunities resulting from the transition to electric vehicles.
We are satisfied that the Group’s disclosures in the Critical accounting judgements and sources of estimation
uncertainty in the Accounting policies section, in note 11 Intangible assets, note 12 Property, plant and
equipment and note 13 Right-of-use-assets and Lease liabilities appropriately highlight these uncertainties.
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Independent auditor’s report to the members of Inchcape plc continued
5.2. Central America goodwill and indefinite-life intangible asset impairments
Key audit matter
description
Account balances: Intangible assets. Refer to the Audit Committee report on page 65, the Critical
accounting judgements and sources of estimation uncertainty in the Accounting policies section on
page 117, note 2 Exceptional items on page 132 and note 11 Intangible assets on page 145.
In addition to goodwill of £119.0 million (2019: £215.7 million) the Group has distribution agreements of
£246.6 million (2019: £261.1 million) which are classified as indefinite-life intangible assets. £37.6 million
(2019: £44.8 million) of the goodwill is allocated to Central America and £52.2 million (2019: £85.3 million)
of the value of the distribution agreements relates to the exclusive right to distribute Suzuki vehicles in
Costa Rica and Panama.
The goodwill and distribution agreement assets were recognised after the acquisition of the Grupo
Rudelman business in 2018. Since acquisition, political instability, in Costa Rica in particular, has
impacted demand for vehicles in that market. The COVID-19 pandemic has had a significant impact
on the economies in Costa Rica and Panama and profitability fell further in the current year.
Management performed impairment reviews on the Suzuki CGU and then the Central America group
of CGUs, which resulted in an impairment of £31.2 million against the value of the distribution agreement
and £6.2 million against the value of the goodwill. There are significant uncertainties over the strength
and timing of the recovery of the market, increasing the uncertainty in management’s forecast cash
flow assumptions, which were modelled through different scenarios considered as part of their
impairment review.
Although the penetration of electric vehicles in each market is currently low, in Costa Rica as part of its
‘National Decarbonization Plan’ there are commitments to move to full electrification of its transport
network by 2050.
How the scope of our
audit responded to
the key audit matter
Our procedures in response to the key audit matter identified included:
– Obtaining an understanding of relevant controls over the preparation and use of cash flow forecasts
used in the impairment reviews;
– Assessing the integrity of the models used by management including reviewing their mechanical
accuracy;
– Assessing management’s historical forecasting accuracy by comparing budgets to actuals;
– Benchmarking management’s assumptions against views of internal industry experts, reputable third
party industry growth forecasts, publications, news articles, government legislation and economic data;
– Challenging management’s analysis of the risks and opportunities arising from the transition to electric
vehicles and the impact this has on forecast future cash flows;
– Evaluating the competence, capabilities and objectivity of management’s expert;
– Engaging internal valuations specialists to independently evaluate the appropriateness of inputs and
methodology used in determining the discount rates used;
– Performing sensitivities in order to challenge the reasonableness of management’s assumptions; and
– Assessing the appropriateness of management’s disclosures.
Key observations
We concluded that the judgements management have made are reasonable.
There are uncertainties which remain, particularly the strength of the recovery in demand for vehicles
and aftersales services after the impact of the COVID-19 pandemic, in what has historically been a
volatile market, and the risks and opportunities resulting from the transition to electric vehicles.
We are satisfied that the Group’s disclosures in the Critical accounting judgements and sources of
estimation uncertainty in the Accounting policies section and note 11 Intangible assets appropriately
highlight these uncertainties.
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6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope
of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Materiality
£10.7 million (2019: £16.1 million)
£9.0 million (2019: £16.0 million)
Group financial statements
Parent company financial statements
Basis for determining
materiality
Our materiality was determined on the basis of
1.0% of net assets and equates to 8.3% of profit
before tax and exceptional items.
Rationale for the
benchmark applied
Prior year materiality was determined based on 5%
profit before taxation adjusted for other asset
impairments, restructuring costs and gains and
losses on the disposal of sites and businesses.
We consider net assets to be an important
benchmark for the Group for 2020 given the
volatility in profit in the current year when
compared to previous years. This volatility resulted
from the impact of the COVID-19 pandemic on the
Group’s operations and consumer demand in the
markets in which the Group operates. Further, net
assets continues to reflect the ability of the Group
to meet ongoing obligations as they fall due.
Parent company materiality equates to 1.1% of
net assets.
In the prior year parent company materiality
equated to 1% of net assets, capped lower than
Group materiality.
As the Company is non-trading, operates primarily
as a holding company for the Group’s trading
entities, and is not profit orientated, we consider the
net asset position to be the most appropriate
benchmark to use.
Net assets £1,084m
Net assets
Group materiality
Group materiality £10.7m
Component materiality
range £1.9m to £9.0m
Audit Committee
reporting threshold £0.5m
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial statements as a whole.
Performance
materiality
Basis and rationale
for determining
performance
materiality
Group financial statements
Parent company financial statements
70% (2019: 70%) of Group materiality
70% (2019: 70%) of parent company materiality
We set our performance materiality after considering:
– our cumulative experience from prior year audits, including the low value of misstatements identified in
prior periods and management’s willingness to correct any misstatements identified;
– our risk assessment, including our understanding of the entity and its environment and the impact of
COVID-19 on the financial statements; and
– our assessment of the Group’s overall control environment.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £0.5 million (2019:
£0.8 million), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report
to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
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7. An overview of the scope of our audit
Identification and scoping of components
7.1.
In selecting the components which are in scope for audit procedures to be performed as part of the Group audit, we consider:
– the inherent risk in each of the markets that the Group operates;
– the Group’s control environment;
– the significance of identified risks in each of the components;
– the financial significance of the component to the Group’s revenue, profit/loss and net assets; and
– the nature of any acquisitions and disposals within the year.
We conducted our work in 18 (2019: 19) countries, engaging 18 (2019: 21) component audit teams with 23 (2019: 25) reporting
units subject to audit procedures. Changes in the number of components identified were driven by the disposal of certain of the
Group’s operations, as well as acquisitions and changes in the relative prominence and risk of other components within the Group.
Our significant components which were subject to full audit procedures were in Australia, Chile, Colombia, Ethiopia, Hong Kong,
Russia, Singapore and the UK. Our components performed audits of specific account balances in Brunei, Belgium, Costa Rica,
Ecuador, Greece, Guam, Peru, Poland, Romania and Uruguay.
The range of component materialities applied, excluding the parent company, is £1.9 million to £9.0 million (2019: £1.0 million to
£6.8 million). The reporting units where we conducted our audit work accounted for 90% (2019: 88%) of the Group’s revenue, 90%
(2019: 95%) of the Group’s profit before taxation and 90% (2019: 89%) of the Group’s net assets.
10
18
Revenue %
72
10
18
Profit before
tax %
72
10
26
Net
assets %
64
Full audit scope
Specified audit procedures
Review at Group level
Full audit scope
Specified audit procedures
Review at Group level
Full audit scope
Specified audit procedures
Review at Group level
7.2. Working with other auditors
We engaged component auditors from Deloitte member firms to perform procedures at these components under our direction and
supervision. This approach also allows us to engage local auditors who have appropriate knowledge of local regulations to perform
the audit work, under a common Deloitte audit approach. We issued detailed instructions to the component auditors and held
planning meetings, interim update meetings and year end close meetings with each component team. In response to the
COVID-19 pandemic which limited our ability to make component visits, frequent calls were held between the Group and
component teams throughout the year and remote access to relevant documents was provided. A dedicated senior member of
the Group audit team was assigned to facilitate an effective and consistent approach to component oversight, which focused on
their audit work over key judgements.
In addition to the work performed at a component level the Group audit team also performed audit procedures on the parent
company and consolidated financial statements, corporate activities such as treasury and pensions, goodwill and intangible asset
impairments, litigation provisions, the consolidation, going concern assessment and financial statement disclosures. The Group
audit team also performed analytical reviews on out-of-scope components.
8. Other information
The other information comprises the information included in the Annual Report, other than the financial statements and our
auditor’s report thereon. The Directors are responsible for the other information contained within the Annual Report. Our opinion on
the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise
to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
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Responsibilities of Directors
9.
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the parent company’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group or the parent company or to cease operations, or have no
realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws
and regulations, we considered the following:
– the nature of the industry and sector, control environment and business performance including the design of the Group’s
remuneration policies, key drivers for Directors’ remuneration, bonus levels and performance targets;
– results of our enquiries of management, internal audit, in-house legal counsel and the Audit Committee about their own
identification and assessment of the risks of irregularities;
– any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-
compliance;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
– the matters discussed among the audit engagement team including significant component audit teams and relevant internal
specialists, including tax, valuations, pensions and IT regarding how and where fraud might occur in the financial statements and
any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in the following areas: the judgements related to goodwill and other asset impairment
reviews, and the valuation of used vehicle inventory. In common with all audits under ISAs (UK), we are also required to perform
specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions of
those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial
statements. The key laws and regulations we considered in this context included the UK Companies Act, Listing Rules, pensions
legislation and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but
compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty. These included the
Group’s environmental regulations.
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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Independent auditor’s report to the members of Inchcape plc continued
11.2. Audit response to risks identified
As a result of performing the above, we identified UK goodwill and site impairment and Central America goodwill and indefinite-life
intangible asset impairments as key audit matters related to the potential risk of fraud. The key audit matters section of our report
explains the matters in more detail and also describes the specific procedures we performed in response to those key audit matters.
In addition to the above, our procedures to respond to risks identified included the following:
– reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect on the financial statements;
– enquiring of management, the Audit Committee and in-house legal counsel concerning actual and potential litigation and
claims;
– performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
– reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence
with HMRC;
– in addressing the risk of fraud through inappropriate valuation of used vehicle inventory, testing the value of vehicles with
reference to third party data sources; and assessing whether the value of vehicles sold after year end provide information about
the value of vehicles at the balance sheet date; and
– in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members
including internal specialists and significant component audit teams, and remained alert to any indications of fraud or non-
compliance with laws and regulations throughout the audit.
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
– 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; and
– the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent company and their environment obtained in the
course of the audit, we have not identified any material misstatements in the strategic report or the Directors’ report.
13. Corporate Governance Statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
– the Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any
material uncertainties identified set out on page 100;
– the Directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is
appropriate set out on page 50;
– the Directors’ statement on fair, balanced and understandable set out on page 100;
– the Board's confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 57;
– the section of the Annual Report that describes the review of effectiveness of risk management and internal control systems set
out on page 70; and
– the section describing the work of the Audit Committee set out on page 65.
110
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14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
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; or
– adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
– the parent company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remuneration have
not been made or the part of the Directors’ remuneration report to be audited is not in agreement with the accounting records
and returns.
We have nothing to report in respect of these matters.
15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by the members on 25 May 2018 to audit the financial
statements for the year ending 31 December 2018 and subsequent financial periods. The period of total uninterrupted
engagement including previous renewals and reappointments of the firm is three years, covering the years ending 31 December
2018 to 31 December 2020.
15.2. Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with
ISAs (UK).
16. Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Anna Marks FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, UK
24 February 2021
Inchcape plc Annual Report and Accounts 2019
Inchcape Annual Report and Accounts 2020 111
111
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Consolidated income statement
For the year ended 31 December 2020
Before
exceptional
items
2020
£m
Exceptional
items
(note 2)
2020
£m
Before
exceptional
items
2019
£m
Exceptional
items
(note 2)
2019
£m
Total
2020
£m
Notes
Revenue
Cost of sales
Gross profit
Net operating expenses
Operating profit / (loss)
Share of profit after tax of joint ventures and associates
Profit / (loss) before finance and tax
Finance income
Finance costs
Profit / (loss) before tax
Tax
Profit / (loss) for the year
1, 3
3
14
6
7
8
6,837.8
(5,948.4)
889.4
(723.9)
165.5
–
165.5
14.4
(51.0)
128.9
(33.2)
95.7
– 6,837.8
(11.6) (5,960.0)
877.8
(11.6)
(245.5) (969.4)
(91.6)
(257.1)
–
–
(91.6)
(257.1)
14.4
–
(51.0)
–
(257.1) (128.2)
(9.0)
(232.9) (137.2)
24.2
9,379.7
(8,107.6)
1,272.1
(899.0)
373.1
0.3
373.4
24.1
(71.2)
326.3
(75.6)
250.7
–
–
–
75.5
75.5
–
75.5
–
–
75.5
2.5
78.0
(Loss) / profit attributable to:
– Owners of the parent
– Non-controlling interests
Basic (loss) / earnings per share (pence)
Diluted (loss) / earnings per share (pence)
9
9
(140.1)
2.9
(137.2)
(35.6)p
(35.6)p
The notes on pages 127 to 175 are an integral part of these consolidated financial statements.
Total
2019
£m
9,379.7
(8,107.6)
1,272.1
(823.5)
448.6
0.3
448.9
24.1
(71.2)
401.8
(73.1)
328.7
322.9
5.8
328.7
79.0p
78.4p
112
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Inchcape plc Annual Report and Accounts 2020
Consolidated income statement
For the year ended 31 December 2020
Consolidated statement of comprehensive income
For the year ended 31 December 2020
Share of profit after tax of joint ventures and associates
14
Profit / (loss) before finance and tax
Revenue
Cost of sales
Gross profit
Net operating expenses
Operating profit / (loss)
Finance income
Finance costs
Profit / (loss) before tax
Tax
Profit / (loss) for the year
(Loss) / profit attributable to:
– Owners of the parent
– Non-controlling interests
Before
Exceptional
Before
Exceptional
exceptional
items
2020
£m
items
(note 2)
2020
£m
Total
2020
£m
exceptional
items
2019
£m
items
(note 2)
2019
£m
Notes
1, 3
6,837.8
– 6,837.8
9,379.7
(5,948.4)
(11.6) (5,960.0)
(8,107.6)
889.4
(11.6)
877.8
1,272.1
3
(723.9)
(245.5) (969.4)
(899.0)
165.5
(257.1)
(91.6)
–
165.5
14.4
(51.0)
128.9
(33.2)
(257.1)
(91.6)
–
–
–
–
14.4
(51.0)
(257.1) (128.2)
24.2
(9.0)
95.7
(232.9) (137.2)
373.1
0.3
373.4
24.1
(71.2)
326.3
(75.6)
250.7
–
–
–
–
–
–
75.5
75.5
75.5
75.5
2.5
78.0
Total
2019
£m
9,379.7
(8,107.6)
1,272.1
(823.5)
448.6
0.3
448.9
24.1
(71.2)
401.8
(73.1)
328.7
322.9
5.8
328.7
79.0p
78.4p
6
7
8
9
9
Basic (loss) / earnings per share (pence)
Diluted (loss) / earnings per share (pence)
The notes on pages 127 to 175 are an integral part of these consolidated financial statements.
(140.1)
2.9
(137.2)
(35.6)p
(35.6)p
(Loss) / profit for the year
Other comprehensive (loss) / income:
Items that will not be reclassified to the consolidated income statement
Changes in the fair value of equity investments at fair value through other comprehensive income
Defined benefit pension scheme remeasurements
Current tax recognised in consolidated statement of comprehensive income
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
Exchange differences on translation of foreign operations
Current tax recognised in consolidated statement of comprehensive income
Deferred tax recognised in consolidated statement of comprehensive income
Other comprehensive loss for the year, net of tax
Total comprehensive (loss) / income for the year
Total comprehensive (loss) / income attributable to:
– Owners of the parent
– Non-controlling interests
The notes on pages 127 to 175 are an integral part of these consolidated financial statements.
Notes
2020
£m
2019
£m
(137.2)
328.7
5
17
26
17
(2.7)
14.8
–
(2.5)
9.6
(3.2)
(51.5)
0.3
(0.9)
(55.3)
(45.7)
(182.9)
–
(71.7)
–
10.1
(61.6)
(25.9)
(98.6)
–
7.0
(117.5)
(179.1)
149.6
(186.2)
3.3
(182.9)
146.8
2.8
149.6
112
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Inchcape Annual Report and Accounts 2020 113
113
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Consolidated statement of financial position
As at 31 December 2020
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Investments in joint ventures and associates
Financial assets at fair value through other comprehensive income
Trade and other receivables
Deferred tax assets
Retirement benefit asset
Current assets
Inventories
Trade and other receivables
Financial assets at fair value through other comprehensive income
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
Lease liabilities
Borrowings
Liabilities directly associated with the disposal group
Non-current liabilities
Trade and other payables
Provisions
Deferred tax liabilities
Lease 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
2020
£m
2019
£m
11
12
13
14
15
16
17
5
18
16
15
24
19
20
21
24
22
13
23
20
21
22
17
13
23
5
25
26
27
450.2
569.8
257.3
2.4
3.6
49.2
68.6
101.0
1,502.1
1,216.2
369.6
0.2
13.3
20.6
481.2
2,101.1
31.2
2,132.3
3,634.4
577.9
695.1
313.3
4.3
6.9
38.7
58.3
78.7
1,773.2
1,566.9
512.3
0.2
16.2
21.6
423.0
2,540.2
149.4
2,689.6
4,462.8
(1,610.3)
(42.4)
(65.0)
(26.8)
(58.5)
(6.1)
(1,809.1)
(7.7)
(1,816.8)
(1,996.4)
(27.4)
(82.4)
(23.0)
(56.8)
(50.1)
(2,236.1)
(106.1)
(2,342.2)
(69.3)
(19.8)
(79.1)
(274.3)
(210.0)
(81.4)
(733.9)
(77.2)
(12.9)
(96.7)
(296.0)
(270.0)
(69.2)
(822.0)
(2,550.7)
1,083.7
(3,164.2)
1,298.6
39.4
146.7
141.2
(248.5)
985.6
1,064.4
19.3
1,083.7
40.0
146.7
140.6
(190.4)
1,141.4
1,278.3
20.3
1,298.6
The notes on pages 127 to 175 are an integral part of these consolidated financial statements. The consolidated financial statements
on pages 112 to 175 were approved by the Board of Directors on 24 February 2021 and were signed on its behalf by:
Duncan Tait,
Group Chief Executive
Gijsbert de Zoeten,
Chief Financial Officer
114
114
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Consolidated statement of financial position
As at 31 December 2020
Consolidated statement of changes in equity
For the year ended 31 December 2020
At 1 January 2019
41.6
146.7
139.0
(75.9) 1,093.1
1,344.5
23.3
1,367.8
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Other
reserves
(note 26)
£m
Retained
earnings
(note 27)
£m
Notes
Total equity
attributable
to owners of
the parent
£m
Non-
controlling
interests
£m
Total
shareholders’
equity
£m
Investments in joint ventures and associates
Financial assets at fair value through other comprehensive income
Profit for the year
Other comprehensive loss for the year
Total comprehensive income for the year
–
–
–
Share-based payments, net of tax
Share buyback programme
Net purchase of own shares by the
Inchcape Employee Trust
Dividends:
– Owners of the parent
– Non-controlling interests
At 1 January 2020
(Loss) / profit for the year
Other comprehensive loss for the year
Total comprehensive loss for the year
Share-based payments, net of tax
Share buyback programme
Dividends:
– Owners of the parent
– Non-controlling interests
At 31 December 2020
–
–
–
–
–
–
–
–
–
–
(114.5)
(114.5)
322.9
(61.6)
261.3
322.9
(176.1)
146.8
5.8
(3.0)
2.8
–
1.6
–
–
–
–
6.8
(100.0)
6.8
(100.0)
(9.3)
(9.3)
–
–
–
328.7
(179.1)
149.6
6.8
(100.0)
(9.3)
4,17
25
–
(1.6)
–
10
–
–
40.0
–
–
146.7
–
–
(110.5)
–
140.6 (190.4) 1,141.4 1,278.3
(110.5)
–
–
–
–
–
–
–
(0.6)
–
–
–
–
–
–
–
–
(140.1)
–
(58.1)
12.0
(58.1) (128.1)
(140.1)
(46.1)
(186.2)
–
0.6
–
–
3.7
(31.4)
3.7
(31.4)
–
(5.8)
20.3
(110.5)
(5.8)
1,298.6
2.9
0.4
3.3
–
–
(137.2)
(45.7)
(182.9)
3.7
(31.4)
–
–
39.4
–
–
146.7
–
–
–
–
141.2 (248.5)
–
–
–
–
985.6 1,064.4
–
(4.3)
19.3
–
(4.3)
1,083.7
4,17
25
10
The notes on pages 127 to 175 are an integral part of these consolidated financial statements.
Share-based payments include a net tax credit of £0.4m (current tax charge of £nil and a deferred tax credit of £0.4m)
(2019 – net tax credit of £0.7m (current tax charge of £nil and a deferred tax credit of £0.7m)).
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 115
115
Financial assets at fair value through other comprehensive income
Assets held for sale and disposal group
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Trade and other receivables
Deferred tax assets
Retirement benefit asset
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Current tax assets
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Derivative financial instruments
Current tax liabilities
Provisions
Lease liabilities
Borrowings
Non-current liabilities
Trade and other payables
Provisions
Deferred tax liabilities
Lease liabilities
Borrowings
Retirement benefit liability
Total liabilities
Net assets
Equity
Share capital
Share premium
Capital redemption reserve
Other reserves
Retained earnings
Non-controlling interests
Total equity
Equity attributable to owners of the parent
Liabilities directly associated with the disposal group
Notes
2020
£m
2019
£m
11
12
13
14
15
16
17
5
18
16
15
24
19
20
21
24
22
13
23
20
21
22
17
13
23
5
25
26
27
450.2
569.8
257.3
2.4
3.6
49.2
68.6
101.0
577.9
695.1
313.3
4.3
6.9
38.7
58.3
78.7
1,502.1
1,773.2
1,216.2
1,566.9
369.6
512.3
0.2
13.3
20.6
0.2
16.2
21.6
481.2
423.0
2,101.1
2,540.2
31.2
2,132.3
3,634.4
149.4
2,689.6
4,462.8
(1,610.3)
(1,996.4)
(42.4)
(65.0)
(26.8)
(58.5)
(6.1)
(27.4)
(82.4)
(23.0)
(56.8)
(50.1)
(1,809.1)
(2,236.1)
(7.7)
(106.1)
(1,816.8)
(2,342.2)
(69.3)
(19.8)
(79.1)
(274.3)
(210.0)
(81.4)
(77.2)
(12.9)
(96.7)
(296.0)
(270.0)
(69.2)
(733.9)
(822.0)
(2,550.7)
(3,164.2)
1,083.7
1,298.6
39.4
146.7
141.2
40.0
146.7
140.6
(248.5)
(190.4)
985.6
1,064.4
19.3
1,141.4
1,278.3
20.3
1,083.7
1,298.6
The notes on pages 127 to 175 are an integral part of these consolidated financial statements. The consolidated financial statements
on pages 112 to 116 were approved by the Board of Directors on 24 February 2021 and were signed on its behalf by:
Duncan Tait,
Group Chief Executive
Gijsbert de Zoeten,
Chief Financial Officer
114
Inchcape plc Annual Report and Accounts 2020
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Consolidated statement of cash flows
For the year ended 31 December 2020
Cash generated 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
Net cash inflow from disposal of investments in joint ventures and associates
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of intangible assets
Receipt from sub-lease receivables
Net cash generated from investing activities
Cash flows from financing activities
Share buyback programme
Net purchase of own shares by the Inchcape Employee Trust
Cash inflow from Covid Corporate Financing Facility
Repayment of Covid Corporate Financing Facility
Repayment of Private Placement loan notes
Net cash outflow from other borrowings
Payment of capital element of lease liabilities
Equity dividends paid
Dividends paid to non-controlling interests
Net cash used in financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
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
– Cash at bank and cash equivalents included in disposal groups held for sale
The notes on pages 127 to 175 are an integral part of these consolidated financial statements.
Notes
28a
29
29
23
23
10
28b
19
19
23
20
2020
£m
2019
£m
338.8
(51.8)
13.9
(46.1)
254.8
(31.5)
71.8
2.0
(27.4)
(20.1)
6.7
0.2
0.7
2.4
(32.1)
–
99.6
(99.6)
–
(66.1)
(57.4)
–
(4.3)
(159.9)
97.3
379.2
(0.2)
476.3
378.5
102.7
(6.1)
1.2
476.3
445.9
(74.1)
22.0
(66.6)
327.2
(41.2)
230.4
0.1
(44.9)
(24.7)
15.7
–
0.6
136.0
(99.3)
(9.3)
–
–
(75.4)
(122.0)
(65.7)
(110.5)
(5.8)
(488.0)
(24.8)
463.4
(59.4)
379.2
321.5
101.5
(43.8)
–
379.2
116
116
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Consolidated statement of cash flows
For the year ended 31 December 2020
Accounting policies
Cash generated 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
Net cash inflow from disposal of investments in joint ventures and associates
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of intangible assets
Receipt from sub-lease receivables
Net cash generated from investing activities
Cash flows from financing activities
Share buyback programme
Net purchase of own shares by the Inchcape Employee Trust
Cash inflow from Covid Corporate Financing Facility
Repayment of Covid Corporate Financing Facility
Repayment of Private Placement loan notes
Net cash outflow from other borrowings
Payment of capital element of lease liabilities
Equity dividends paid
Dividends paid to non-controlling interests
Net cash used in financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
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
Notes
2020
£m
2019
£m
28a
338.8
(51.8)
13.9
(46.1)
254.8
(31.5)
71.8
2.0
(27.4)
(20.1)
6.7
0.2
0.7
2.4
(32.1)
99.6
(99.6)
(66.1)
(57.4)
–
–
–
(4.3)
97.3
379.2
(0.2)
476.3
378.5
102.7
(6.1)
1.2
445.9
(74.1)
22.0
(66.6)
327.2
(41.2)
230.4
0.1
(44.9)
(24.7)
15.7
–
0.6
136.0
(99.3)
(9.3)
–
–
(75.4)
(122.0)
(65.7)
(110.5)
(5.8)
(24.8)
463.4
(59.4)
379.2
321.5
101.5
(43.8)
–
29
29
23
23
10
28b
19
19
23
20
– Cash at bank and cash equivalents included in disposal groups held for sale
476.3
379.2
The notes on pages 127 to 175 are an integral part of these consolidated financial statements.
General information
Inchcape plc is a public company limited by shares, domiciled and incorporated in the UK, and registered in England and Wales.
The address of the registered office is 22a St James’s Square, London, SW1Y 5LP. The nature of the Group’s operations and principal
activities are set out in note 1 and on pages 1 to 51.
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 financial assets at fair
value through other comprehensive income, 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
Based on the Group's cash flow forecasts and projections, the Board is satisfied that the Group will be able to operate within the
level of its committed facilities for the foreseeable future. For this reason, the Board continues to adopt the going concern basis in
preparing its financial statements. In assessing whether the Group is a going concern, the implications of COVID-19 have been
considered together with measures taken to mitigate its impact on the Group. In making this assessment the Group has considered
available liquidity in relation to net debt and committed facilities, the Group’s latest forecasts for 2021 and 2022 cash flows together
with COVID-19 adjusted scenarios. The forecasts used reflected the likely economic downturn triggered by COVID-19, with a key
emphasis on the Board approved operating plan for 2021 and a forecast for 2022 based on a set of reasonably defined forecast
principles.
Given the global political and economic uncertainty resulting from the COVID-19 pandemic, we expect to see volatility, business
disruption and the impact of economic downturns in the markets in which the Group operates during 2021 and into 2022. During
2020 and the early part of 2021, the business has been impacted by government action to control the COVID-19 pandemic with a
number of the Group’s businesses suffering restricted trading from time-to-time and to a greater or lesser extent.
During 2020, action was taken to strengthen the Group’s resilience to the trading volatility and liquidity position in light of the
environment and circumstance. These actions included:
– initiation of a major cost-restructuring programme to rationalise the Group’s footprint, a reduction in the global workforce and
re-negotiation of third-party expenditure;
(159.9)
(488.0)
– temporary reduction in advertising and promotional expenditure, reducing executive pay for four months, freezing other pay and
recruitment and reductions in operating expenditure;
– in the first half of 2020, the utilisation of government support measures such as the UK job retention scheme combined with UK
business rates suspension and international government support measures, where available;
– collaborating closely with OEMs and banks to manage inventory and inventory financing levels;
– suspending the share buyback programme; and
– cancelling the final dividend for 2019 and not declaring an interim dividend for 2020.
Committed bank facilities and Private Placement borrowings totalling £910m, of which £210m was drawn at 31 December 2020,
are subject to the same interest cover covenant based on an adjusted EBITA measure to interest on consolidated borrowings
measured on a trailing 12 month basis at June and December. While the UK Government’s Covid Corporate Financing Facility
(CCFF) scheme remains available to the Group, the CCFF is not considered to be a committed facility for the purposes of the going
concern assessment.
The Board approved operating plan for 2021 and the Group’s forecast for 2022 indicate that the Group is expected to be
compliant with this covenant throughout the forecast period and to have sufficient liquidity to continue in operation throughout
that period.
A range of sensitivities has been applied to the forecasts to assess the Group’s compliance with its covenant requirements over the
forecast period. These sensitivities included:
– further periods of COVID-19 restrictions similar in nature and impact to those seen in the second half of 2020, impacting half of the
Group’s markets simultaneously throughout 2021;
– an overall reduction in gross margins;
– an appreciation in Sterling against the Group’s main trading companies; combined with
– working capital sensitivities.
In a scenario where all of the above sensitivities occur at the same time, the Group has modelled the possibility of the interest cover
covenant being breached in 2021. With the interest cover covenant measured on a trailing 12 month basis, the sensitised forecasts
indicate that the Group is not expected to breach any covenants and would be compliant with the interest cover requirements at
December 2021 and throughout the forecast period. Additionally, under these circumstances, the Group expects to have sufficient
funds to meet cash flow requirements. In a scenario where such restrictions impacted half of the Group's markets simultaneously for
a period of 24 months, the Group is forecasted to be compliant with the interest cover covenant.
116
Inchcape plc Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 117
117
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Accounting policies continued
Reverse stress test scenario analysis has been applied to the forecasts to assess particular scenarios in which the Group would
breach its covenant or have insufficient funds to meet cash flow requirements. One such scenario was to model more severe
trading restrictions in all markets simultaneously with the impact comparable to those experienced in a few markets in H1 2020,
which amounts to a material cessation in operations and revenue. Under this scenario, the Group could sustain such restrictions for
a period of approximately five months before breaching the interest cover covenant, but even in this circumstance, would still have
sufficient liquidity. We deem this circumstance to be highly unlikely due to the geographic diversity of the Group’s operations and
our increased ability to trade digitally through the trading restrictions.
The Board therefore concluded that the Group will be able to operate within the level of its committed facilities for the foreseeable
future and the Directors consider it appropriate to adopt the going concern basis of accounting in preparing the financial
statements for the year ending 31 December 2020.
Newly adopted accounting policies
From 1 January 2020, the following standards became effective in the Group’s consolidated financial statements:
– Amendments to References to the Conceptual Framework in IFRS Standards;
– Amendments to IAS 1 and IAS 8 – Definition of Material;
– Amendments to IFRS 3 – Definition of a Business;
– Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest Rate Benchmark Reform; and
– Amendment to IFRS 16 in relation to COVID-19 Related Rent Concessions
The accounting policies have been applied consistently throughout the reporting period, other than in respect of the amendment
to IFRS 16, which has been newly adopted. The other standards that became applicable for the current period did not have any
impact on the Group’s accounting policies and did not require adjustments.
The Group has not early adopted other standards, amendments to standards or interpretations that have been issued but are not
yet effective.
Amendment to IFRS 16 – COVID-19 Related Rent Concessions
The amendment provides lessees with relief in the form of an optional exemption from assessing whether a rent concession related
to COVID-19, and that meets certain conditions, is a lease modification. Lessees can elect to account for qualifying rent
concessions in the same way as they would if they were not lease modifications. In applying the practical expedient a lessee would
generally account for a forgiveness or waiver of lease payments as a variable lease payment, and recognise the concession in the
period in which the event or condition that triggers those payments occurs. The lessee also makes a corresponding adjustment to
the lease liability, in effect derecognising the part of the lease liability that has been forgiven or waived. On adoption of the
amendment, the Group has recognised a credit of £1.1m in the consolidated income statement.
Standards not effective at the balance sheet date
The following standards were in issue but were not yet effective at the balance sheet date. These standards have not yet been early
adopted by the Group, and will be applied for the Group’s financial years commencing on or after 1 January 2021:
– Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest Rate Benchmark Reform – Phase 2;
– Annual Improvements to IFRS Standards 2018–2020;
– Amendments to IAS 16 – Property, Plant and Equipment – Proceeds before Intended Use;
– Amendments to IAS 37 – Onerous Contracts – Cost of Fulfilling a Contract;
– Amendments to IFRS 3 (May 2020) – Reference to the Conceptual Framework;
– IFRS 17 – Insurance Contracts; and
– Amendments to IAS 1 – Classification of Liabilities as Current or Non-current;
Management are currently reviewing the new standards to assess the impact that they may have on the Group’s reported position
and performance. Management do not expect that the adoption of the standards listed above will have a material impact on the
financial statements of the Group.
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 is transferred out
of the Group.
118
118
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Accounting policies continued
Reverse stress test scenario analysis has been applied to the forecasts to assess particular scenarios in which the Group would
breach its covenant or have insufficient funds to meet cash flow requirements. One such scenario was to model more severe
trading restrictions in all markets simultaneously with the impact comparable to those experienced in a few markets in H1 2020,
which amounts to a material cessation in operations and revenue. Under this scenario, the Group could sustain such restrictions for
a period of approximately five months before breaching the interest cover covenant, but even in this circumstance, would still have
sufficient liquidity. We deem this circumstance to be highly unlikely due to the geographic diversity of the Group’s operations and
our increased ability to trade digitally through the trading restrictions.
The Board therefore concluded that the Group will be able to operate within the level of its committed facilities for the foreseeable
future and the Directors consider it appropriate to adopt the going concern basis of accounting in preparing the financial
statements for the year ending 31 December 2020.
Newly adopted accounting policies
From 1 January 2020, the following standards became effective in the Group’s consolidated financial statements:
– Amendments to References to the Conceptual Framework in IFRS Standards;
– Amendments to IAS 1 and IAS 8 – Definition of Material;
– Amendments to IFRS 3 – Definition of a Business;
– Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest Rate Benchmark Reform; and
– Amendment to IFRS 16 in relation to COVID-19 Related Rent Concessions
The accounting policies have been applied consistently throughout the reporting period, other than in respect of the amendment
to IFRS 16, which has been newly adopted. The other standards that became applicable for the current period did not have any
impact on the Group’s accounting policies and did not require adjustments.
The Group has not early adopted other standards, amendments to standards or interpretations that have been issued but are not
yet effective.
Amendment to IFRS 16 – COVID-19 Related Rent Concessions
The amendment provides lessees with relief in the form of an optional exemption from assessing whether a rent concession related
to COVID-19, and that meets certain conditions, is a lease modification. Lessees can elect to account for qualifying rent
concessions in the same way as they would if they were not lease modifications. In applying the practical expedient a lessee would
generally account for a forgiveness or waiver of lease payments as a variable lease payment, and recognise the concession in the
period in which the event or condition that triggers those payments occurs. The lessee also makes a corresponding adjustment to
the lease liability, in effect derecognising the part of the lease liability that has been forgiven or waived. On adoption of the
amendment, the Group has recognised a credit of £1.1m in the consolidated income statement.
Standards not effective at the balance sheet date
The following standards were in issue but were not yet effective at the balance sheet date. These standards have not yet been early
adopted by the Group, and will be applied for the Group’s financial years commencing on or after 1 January 2021:
– Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest Rate Benchmark Reform – Phase 2;
– Annual Improvements to IFRS Standards 2018–2020;
– Amendments to IAS 16 – Property, Plant and Equipment – Proceeds before Intended Use;
– Amendments to IAS 37 – Onerous Contracts – Cost of Fulfilling a Contract;
– Amendments to IFRS 3 (May 2020) – Reference to the Conceptual Framework;
– IFRS 17 – Insurance Contracts; and
– Amendments to IAS 1 – Classification of Liabilities as Current or Non-current;
Management are currently reviewing the new standards to assess the impact that they may have on the Group’s reported position
and performance. Management do not expect that the adoption of the standards listed above will have a material impact on the
financial statements of the Group.
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 is transferred out
of the Group.
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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 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 is measured at the fair value of consideration receivable, net of any discounts, rebates, trade allowances, incentives,
or amounts collected on behalf of third parties. It is recognised to the extent that the transfer of promised goods or services to a
customer has been satisfied and the revenue can be reliably measured. Revenue excludes sales-related taxes and intra-group
transactions. In practice this means that:
Revenue from the sale of goods is recognised when the obligation to transfer the goods to the customer has been satisfied and the
revenue can reliably be measured. The obligation to transfer goods to the customer is considered to have been satisfied when the
vehicles or parts are invoiced and physically dispatched or collected.
Revenue from the rendering of services to the customer is considered to have been satisfied when the service has been undertaken.
Where the Group acts as an agent on behalf of a principal in relation to finance, insurance and similar products, the associated
commission income is recognised within revenue in the period in which the related finance or insurance product is sold and receipt
of payment can be assured.
Where a vehicle is sold to a leasing company and the Group undertakes to repurchase the vehicle for a specified value at a
predetermined date, the sale is not recognised on the basis that the possibility of the buyback being exercised is highly likely.
Consequently, such 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. The difference between the initial amounts received
from the leasing company and the repurchase commitment is recognised 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
repurchase 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.
Where a vehicle is sold subject to a buyback commitment and the possibility of the buyback being exercised by the customer is not
highly likely as the buyback price set is below the expected market value, revenue is recognised in full when the vehicle is sold.
However, an estimate of the value of the buyback payments is deducted from revenue and deferred to the balance sheet.
Similarly, an estimate of the value of the vehicles to be returned is deducted from cost of sales and also deferred to the balance
sheet. These balances are considered to be contract liabilities.
Where additional services are included in the sale of a vehicle to a customer as part of the total vehicle package (e.g. extended
warranty, free servicing, roadside assistance, fuel coupons etc) and the Group is acting as a principal in the fulfilment of the
service, the value of the additional services is separately identified, deducted from consideration receivable, recognised as
deferred revenue on the balance sheet and subsequently recognised as revenue when the service is provided, or recognised on
an input basis with reference to the amount of time elapsed under the contract to which the service relates. These balances are
considered to be contract liabilities. The consideration allocated to additional services is based on the relative standalone selling
price of the additional services within the contract. The value assigned to the additional service is set equal to the value of the
additional service being provided, being the expected cost to the entity plus an appropriate profit margin.
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Accounting policies continued
Amounts relating to accrued income are balances primarily due from manufacturers in relation to volume / target related bonuses
or commissions or warranty related where the work has been completed prior to being invoiced. Any amount previously recognised
as accrued income is reclassified to trade receivables at the point at which it is invoiced to the customer.
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.
Dividend income is recognised when the right to receive payment is established.
Cost of sales includes the expense relating to the estimated cost of self-insured product 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.
Government grants and assistance
Grants received from governments are recognised when there is reasonable assurance that the conditions associated with the
grants have been complied with and the grants will be received. Grants for the reimbursement of operating expenditure are
deducted from the related category of costs in the income statement. Once a government grant is recognised, any related deferred
income is treated in accordance with IAS 20 ‘Accounting for Government Grants and Disclosure of Government Assistance’.
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 credit 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.
The accounting standard covering uncertain tax positions, IFRIC 23 ‘Uncertainty over Income Tax Treatments’, was adopted by the
Group from 1 January 2019. The Group recognises provisions for uncertain tax positions when it is not probable that a tax authority
will accept an uncertain tax treatment used, or proposed to be used, in its income tax filings. Uncertain tax positions are assessed
and measured using management’s estimate of the most likely outcome including an assessment of whether uncertain tax
positions should be considered separately or as a group. The Group recognises interest on late paid taxes as part of financing
costs, and any penalties, if applicable, as part of the income tax expense.
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.
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.
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Accounting policies continued
Amounts relating to accrued income are balances primarily due from manufacturers in relation to volume / target related bonuses
or commissions or warranty related where the work has been completed prior to being invoiced. Any amount previously recognised
as accrued income is reclassified to trade receivables at the point at which it is invoiced to the customer.
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.
Dividend income is recognised when the right to receive payment is established.
Cost of sales includes the expense relating to the estimated cost of self-insured product 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.
Government grants and assistance
Grants received from governments are recognised when there is reasonable assurance that the conditions associated with the
grants have been complied with and the grants will be received. Grants for the reimbursement of operating expenditure are
deducted from the related category of costs in the income statement. Once a government grant is recognised, any related deferred
income is treated in accordance with IAS 20 ‘Accounting for Government Grants and Disclosure of Government Assistance’.
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 credit 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.
The accounting standard covering uncertain tax positions, IFRIC 23 ‘Uncertainty over Income Tax Treatments’, was adopted by the
Group from 1 January 2019. The Group recognises provisions for uncertain tax positions when it is not probable that a tax authority
will accept an uncertain tax treatment used, or proposed to be used, in its income tax filings. Uncertain tax positions are assessed
and measured using management’s estimate of the most likely outcome including an assessment of whether uncertain tax
positions should be considered separately or as a group. The Group recognises interest on late paid taxes as part of financing
costs, and any penalties, if applicable, as part of the income tax expense.
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.
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.
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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.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which
the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Exceptional items
The Group makes certain adjustments to the statutory profit measures in order to derive certain alternative performance measures.
Certain items which are material are presented as exceptional items within their relevant consolidated income statement category.
Exceptional items are those items that, in the judgement of the Group, need to be disclosed separately by virtue of their nature, size
or incidence. The separate reporting of exceptional items helps provide additional useful information regarding the Group’s
business performance and is used by management to facilitate internal performance analysis. Items that may be considered
exceptional in nature include gains or losses on the disposal of businesses, restructuring of businesses, acquisition costs, asset
impairments and the tax effects of these items. Any reversal of an amount previously recognised as an exceptional item would also
be recognised as an exceptional item in a subsequent period.
Business combinations and goodwill
The acquisition of subsidiaries is accounted for using the acquisition method (at the point the Group gains control over a business
as defined by IFRS 3). The cost of the acquisition is measured as the cash paid and the aggregate of the fair values, at the date of
exchange, of other assets transferred, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for
control of the acquiree. The consideration transferred includes the fair value of any asset or liability resulting from a contingent
consideration arrangement at the acquisition date.
Acquisition-related costs are expensed as incurred. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet
the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date. The Group recognises any non-
controlling interests in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interests’
proportionate share of the recognised amounts of acquiree’s identifiable net assets.
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. Cost comprises the 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 eight years. Amortisation is recognised in the consolidated
income statement within ‘net operating expenses’.
Intangible assets acquired as part of a business combination are capitalised separately from goodwill if the benefit of the intangible
asset is obtained through contractual or other legal rights and the fair value can be measured reliably on initial recognition. The
principal intangible assets are agreements with manufacturers for the distribution of new vehicles and parts, which represent the
estimated value of distribution rights acquired in business combinations. Such agreements have varying terms and periods of
renewal and have historically been renewed indefinitely without substantial cost. The Group therefore expects these agreements to
be renewed indefinitely and accordingly no amortisation is charged on these assets. The Group assesses these distribution rights for
impairment on an annual basis.
Other intangible assets acquired in a business combination may include order books and customer contracts. These intangible
assets are amortised on a straight-line basis over their estimated useful life, which is generally less than a year.
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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
Short leasehold buildings
Plant, machinery and equipment
Interest in leased vehicles
2.0%
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 of non-financial assets
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.
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 based on an expected credit loss model under
IFRS 9. The amount of the provision is the difference between the asset’s carrying amount and the expected value of the amounts
to be received.
The provision for impairment of receivables is based on lifetime expected credit losses. Lifetime expected credit losses are
calculated by assessing historic credit loss experience, adjusted for factors specific to the receivable and company. The amount
of the loss is recognised in the consolidated income statement within ‘net operating expenses’. When a trade receivable is not
collectible, 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.
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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 of non-financial assets
consolidated income statement.
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
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.
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
non-current assets.
to be received.
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
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 based on an expected credit loss model under
IFRS 9. The amount of the provision is the difference between the asset’s carrying amount and the expected value of the amounts
The provision for impairment of receivables is based on lifetime expected credit losses. Lifetime expected credit losses are
calculated by assessing historic credit loss experience, adjusted for factors specific to the receivable and company. The amount
of the loss is recognised in the consolidated income statement within ‘net operating expenses’. When a trade receivable is not
collectible, 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.
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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.
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 warranties provided as part of the sale of a vehicle and provide assurance to the
customer that the product will work as sold. Provision is made for the expected cost of labour and parts based on historical claims
experience and expected future trends.
Leasehold property provision
A leasehold property 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, excluding the lease liability already recognised under
IFRS 16. A leasehold property provision is also recognised when there is future obligation relating to the maintenance of leasehold
properties. The provision is based on management’s best estimate of the obligation which forms part of the Group’s unavoidable
cost of meeting its obligations under the lease contracts.
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.
Restructuring provision
A restructuring provision is recognised when a detailed formal plan for the restructuring has been developed and a valid
expectation has been raised in those affected that it will carry out the restructuring by starting to implement the plan or announcing
its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising
from the restructuring which are those amounts that are both necessarily entailed by the restructuring and not associated with
ongoing activities of the Group.
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Accounting policies continued
Disposal group and assets held for sale
Where the Group is committed to a plan to sell and is actively marketing a business and disposal is expected within one year of the
date of classification as held for sale, the assets and liabilities of the associated businesses are separately disclosed in the
consolidated statement of financial position as a disposal group. Assets and liabilities 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 and liabilities 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 or groups of
countries and the market channels, Distribution and Retail. These operating segments are then aggregated into reporting
segments to combine those with similar characteristics. The accounting policies of the reportable segments are the same as the
Group’s accounting policies described in this note.
Financial instruments
The Group classifies its financial instruments in the following categories: measured at amortised cost; measured at fair value
through profit and loss; and measured at fair value through other comprehensive income. Classification and subsequent
remeasurement depends on the Group’s business model for managing the financial asset and its cash flow characteristics. Assets
that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest,
are measured at amortised cost.
Measured at amortised cost includes non-derivative financial assets and liabilities with fixed or determinable payments that are not
quoted in an active market. Financial assets 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. Financial
liabilities are included in current liabilities, except where the maturity date is more than 12 months after the end of the reporting
period. They are initially measured at original cost, less amortisation or provisions raised.
Measured 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.
Measured at fair value through other comprehensive income includes derivative financial assets and liabilities, which are further
explained below, and certain financial assets at fair value such as bonds and equity investments. Derivative financial assets and
liabilities are included in current assets and liabilities, except where the maturity date is more than 12 months after the end of the
reporting period. Financial assets at fair value through other comprehensive income 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.
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.
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 24
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 is 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’.
124
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Inchcape plc Annual Report and Accounts 2020
Accounting policies continued
Disposal group and assets held for sale
Where the Group is committed to a plan to sell and is actively marketing a business and disposal is expected within one year of the
date of classification as held for sale, the assets and liabilities of the associated businesses are separately disclosed in the
consolidated statement of financial position as a disposal group. Assets and liabilities 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 and liabilities 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 or groups of
countries and the market channels, Distribution and Retail. These operating segments are then aggregated into reporting
segments to combine those with similar characteristics. The accounting policies of the reportable segments are the same as the
Group’s accounting policies described in this note.
Financial instruments
The Group classifies its financial instruments in the following categories: measured at amortised cost; measured at fair value
through profit and loss; and measured at fair value through other comprehensive income. Classification and subsequent
remeasurement depends on the Group’s business model for managing the financial asset and its cash flow characteristics. Assets
that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest,
are measured at amortised cost.
Measured at amortised cost includes non-derivative financial assets and liabilities with fixed or determinable payments that are not
quoted in an active market. Financial assets 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. Financial
liabilities are included in current liabilities, except where the maturity date is more than 12 months after the end of the reporting
period. They are initially measured at original cost, less amortisation or provisions raised.
Measured 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.
Measured at fair value through other comprehensive income includes derivative financial assets and liabilities, which are further
explained below, and certain financial assets at fair value such as bonds and equity investments. Derivative financial assets and
liabilities are included in current assets and liabilities, except where the maturity date is more than 12 months after the end of the
reporting period. Financial assets at fair value through other comprehensive income 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.
Cash and cash equivalents in the consolidated statement of financial position comprise cash at bank and in hand, short-term
In the consolidated statement of cash flows, cash and cash equivalents comprise cash and cash equivalents, as defined above,
Cash and cash equivalents
bank deposits and money market funds.
net of bank overdrafts.
Offsetting
balance.
Derivative financial instruments
to the consolidated financial statements.
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
An outline of the objectives, policies and strategies pursued by the Group in relation to its financial instruments is set out in note 24
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 is 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’.
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Inchcape plc Annual Report and Accounts 2020
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.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income are primarily equity instruments that the Group has elected to
recognise the changes in fair value of in other comprehensive income. They are recognised initially at fair value and are re-
measured subsequently at fair value with gains and losses arising from changes in fair value recognised directly in equity and
presented in the Group statement of comprehensive income. Cumulative gains and losses on equity instruments at fair value
through other comprehensive income are not recycled to the Group income statement.
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.
Critical accounting judgements and sources of estimation uncertainty
The preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates
and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best
knowledge, actual results may ultimately differ from those estimates. The estimates and underlying assumptions are reviewed on an
ongoing basis. The Directors have made a number of estimates and assumptions regarding the future, and made some significant
judgements in applying the Group’s accounting policies. These are discussed below:
Sources of estimation uncertainty
The key assumptions about the future, and other key sources of estimation uncertainties at the reporting period end that may have
a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within in the next period are
discussed below:
Impairment of goodwill, indefinite life intangible assets, intangible assets, property, plant and equipment and
right-of-use assets
In the year, a total impairment charge of £222.5m has been recognised in the income statement. The most significant judgement
that could materially impact the charge is in relation to the sensitivity of the assumptions applied to the value in use calculations
performed over the Americas – Suzuki and Americas – Daimler CGU groups.
Goodwill and other indefinite life intangible assets are tested at least annually for impairment. Intangible assets, property, plant and
equipment and right-of-use assets are reviewed for impairment if events or circumstances indicate that the carrying value may not
be recoverable. When an impairment review is carried out, the recoverable value is determined based on value in use calculations
which require the use of estimates, including projected future cash flows (see notes 11, 12 and 13).
The value in use calculations mainly use cash flow projections based on five-year financial forecasts prepared by management.
The key assumptions for these forecasts are those relating to volumes, revenue, gross margins, overheads, the level of working
capital required to support trading and capital expenditure. For CGU groups in the Americas and Africa reporting segment, cash
flows after the five-year period are extrapolated for a further five years using declining growth rates which reduces the year five
growth rate down to the long-term growth rate appropriate for each CGU or CGU group, to better reflect the medium-term growth
expectations for those markets. A terminal value calculation is used to estimate the cash flows after year 10 using these long-term
growth rates. For all other markets, a terminal value calculation is used to estimate the cash flows after year five.
The assumptions used in the value in use calculations are based on past experience, recent trading and forecasts of operational
performance in the relevant markets including the impact of COVID-19 and the UK trading arrangements with the European Union.
They also reflect expectations about continuing relationships with key brand partners and the impact climate change may have on
its operations. Whilst at this stage there is significant uncertainty regarding what the long-term impact of climate change initiatives
may be on the markets in which we operate, the forecasts reflect our best estimate. See notes 11, 12 and 13.
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 125
125
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Accounting policies continued
Tax
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 17). In the event that actual taxable profits are different, such
differences may impact the carrying value of such deferred tax assets in future periods or extend the period over which the deferred
tax assets are utilised.
Pensions and other post-retirement benefits – assumptions
Pension and other post-retirement benefit liabilities are determined based on the actuarial assumptions detailed in note 5. A
number of these assumptions require estimates to be made, including the rate of inflation 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. Key assumptions and sensitivities for post-employment benefit obligations
are disclosed in note 5.
Pensions – discount rate
The Group’s defined benefit obligations are discounted at a rate set by reference to market yields at the end of the reporting period
on high quality corporate bonds. Significant judgement is required when setting the criteria for bonds to be included in the
population from which the yield curve is derived. The most significant criteria considered for the selection of bonds include the issue
size of the corporate bonds, quality of the bonds and the identification of outliers which are excluded. Key assumptions and
sensitivities for post-employment benefit obligations are disclosed in note 5.
Critical accounting judgements
Right-of-use assets and lease liabilities – extension and termination options
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise
an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included
in the lease term if the lease is reasonably certain to be extended (or not terminated).
The Group has several lease contracts that include extension and termination options. The Group applies judgement in evaluating
whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. All relevant factors are
considered that create an economic incentive for it to exercise either the renewal or termination, including: whether there are
significant penalties to terminate (or not extend); whether any leasehold improvements are expected to have a significant
remaining value; historical lease durations; the importance of the underlying asset to the Group’s operations; and the costs and
business disruption required to replace the leased asset.
The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and
that is within the control of the lessee. Refer to note 13 for additional disclosures relating to leases.
Exceptional items
The Directors believe that adjusted profit and earnings per share measures provide additional useful information to shareholders on
the performance of the business. These measures are consistent with how business performance is measured internally by the
Board and Executive Committee. The operating profit before exceptional items and profit before tax and exceptional items
measures are not recognised profit measures under IFRS and may not be directly comparable with such profit measures used by
other companies. The classification of exceptional items requires significant management judgement after considering the nature
and intentions of a transaction. The Group’s definitions of exceptional items are outlined within the Group accounting policies and
note 2 provides further details on current year exceptional items and their adherence to Group policy.
Classification of vehicle funding arrangements
The Group finances the purchase of vehicles using vehicle funding facilities provided by various lenders including the captive
finance companies associated with brand partners. In assessing whether the liabilities arising under these arrangements should be
classified within trade and other payables rather than as an additional component of the Group’s net debt within borrowings, the
Group considers a number of factors including whether the arrangement is a requirement of the relationship with the OEM, in
relation to specific, separately identifiable vehicles held as inventory and whether payment terms are the shorter of the agreed
terms of the arrangement or until the specific vehicle being funded is sold to the end customer. Each agreement entered into has
its own terms and conditions and determining whether a new or renewed arrangement should be classified within trade and other
payables requires significant management judgement. See also note 21.
126
126
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Accounting policies continued
Notes to the financial statements
1 Segmental analysis
The Group has five reportable segments which have been identified based on the operating segments of the Group that are
regularly reviewed by the chief operating decision-maker, which has been determined to be the Executive Committee, in order to
assess performance and allocate resources. Operating segments are then aggregated into reporting segments to combine those
with similar economic characteristics.
Following the disposal of the Group’s business in China and the Retail disposals in Australia in 2019, the management and reporting
of the previous Asia and Australasia regions has changed to encompass the combination of these to form an Asia Pacific (APAC)
region. The Retail businesses in the APAC region which were disposed of in 2019 and 2020 have been maintained as a separate
reportable segment. This segment solely represents the disposed of businesses in both Australia and China, as the Group previously
aggregated its small Retail business in China with its larger Distribution activities in the Asia region.
In addition, reflecting the OEM partners represented and the management of the European region, the Retail operations in Russia,
previously representing its own separate Retail segment, are now combined within the UK and Europe Retail segment. The new
region encompasses Retail operations in the UK, Poland and Russia.
The Group has historically reported the performance of its reporting segments before unallocated central costs. These represent
costs of Group functions and, previously, these costs were reported separately from the results of the Group’s reportable segments.
The Group now fully allocates these costs in arriving at the results reported for each segment.
Comparatives for the prior period have been restated to reflect the above changes.
Critical accounting judgements
Distribution
APAC
UK and Europe
Exclusive distribution and sale of New vehicles and parts in Asia-Pacific markets, together with
associated Aftersales activities of service and bodyshop repairs.
Distribution of New vehicles and parts in Australia and New Zealand together with associated
marketing and logistics operations. Sale of New and Used vehicles in Australia where the
Group is also the distributor of those vehicles, together with associated Aftersales activities of
service, bodyshop repairs and parts sales.
Distribution of New vehicles and parts, together with associated marketing activities, in
mature European markets. Sale of New and Used vehicles in Europe where the Group is also
the distributor of those vehicles, together with associated Aftersales activities of service,
bodyshop repairs and parts sales.
Americas and Africa Distribution of New vehicles and parts in growing markets, together with associated Aftersales
Retail
APAC
UK and Europe
activities of service and bodyshop repairs.
Sale of New and Used vehicles in Australia and China together with associated Aftersales
activities of service, bodyshop repairs and parts sales.
Sale of primarily New and Used premium vehicles in mature markets, together with
associated Aftersales activities of service, bodyshop repairs and parts sales.
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 127
127
Tax
tax assets are utilised.
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 17). In the event that actual taxable profits are different, such
differences may impact the carrying value of such deferred tax assets in future periods or extend the period over which the deferred
Pensions and other post-retirement benefits – assumptions
Pension and other post-retirement benefit liabilities are determined based on the actuarial assumptions detailed in note 5. A
number of these assumptions require estimates to be made, including the rate of inflation 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. Key assumptions and sensitivities for post-employment benefit obligations
are disclosed in note 5.
Pensions – discount rate
The Group’s defined benefit obligations are discounted at a rate set by reference to market yields at the end of the reporting period
on high quality corporate bonds. Significant judgement is required when setting the criteria for bonds to be included in the
population from which the yield curve is derived. The most significant criteria considered for the selection of bonds include the issue
size of the corporate bonds, quality of the bonds and the identification of outliers which are excluded. Key assumptions and
sensitivities for post-employment benefit obligations are disclosed in note 5.
Right-of-use assets and lease liabilities – extension and termination options
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise
an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included
in the lease term if the lease is reasonably certain to be extended (or not terminated).
The Group has several lease contracts that include extension and termination options. The Group applies judgement in evaluating
whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. All relevant factors are
considered that create an economic incentive for it to exercise either the renewal or termination, including: whether there are
significant penalties to terminate (or not extend); whether any leasehold improvements are expected to have a significant
remaining value; historical lease durations; the importance of the underlying asset to the Group’s operations; and the costs and
business disruption required to replace the leased asset.
The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and
that is within the control of the lessee. Refer to note 13 for additional disclosures relating to leases.
Exceptional items
The Directors believe that adjusted profit and earnings per share measures provide additional useful information to shareholders on
the performance of the business. These measures are consistent with how business performance is measured internally by the
Board and Executive Committee. The operating profit before exceptional items and profit before tax and exceptional items
measures are not recognised profit measures under IFRS and may not be directly comparable with such profit measures used by
other companies. The classification of exceptional items requires significant management judgement after considering the nature
and intentions of a transaction. The Group’s definitions of exceptional items are outlined within the Group accounting policies and
note 2 provides further details on current year exceptional items and their adherence to Group policy.
Classification of vehicle funding arrangements
The Group finances the purchase of vehicles using vehicle funding facilities provided by various lenders including the captive
finance companies associated with brand partners. In assessing whether the liabilities arising under these arrangements should be
classified within trade and other payables rather than as an additional component of the Group’s net debt within borrowings, the
Group considers a number of factors including whether the arrangement is a requirement of the relationship with the OEM, in
relation to specific, separately identifiable vehicles held as inventory and whether payment terms are the shorter of the agreed
terms of the arrangement or until the specific vehicle being funded is sold to the end customer. Each agreement entered into has
its own terms and conditions and determining whether a new or renewed arrangement should be classified within trade and other
payables requires significant management judgement. See also note 21.
126
Inchcape plc Annual Report and Accounts 2020
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
1 Segmental analysis continued
2020
Revenue
Total revenue
Results
Operating profit before exceptional items
Operating exceptional items
Operating loss after exceptional items
Share of profit after tax of joint ventures and associates
Loss before finance and tax
Finance income
Finance costs
Loss before tax
Tax
Loss for the year
Distribution
UK
and
Europe
£m
Americas
and
Africa
£m
Total
Distribution
£m
APAC
£m
APAC
£m
Retail
UK
and
Europe
£m
Total
Retail
£m
Total
£m
1,902.6 1,120.2
797.1 3,819.9
9.4 3,008.5 3,017.9 6,837.8
80.0
25.3
34.4
139.7
0.4
25.4
25.8
165.5
(257.1)
(91.6)
–
(91.6)
14.4
(51.0)
(128.2)
(9.0)
(137.2)
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. Revenue is further analysed as follows:
2020
UK
Russia
Australia
Rest of the world
Group
£m
1,978.9
835.6
838.7
3,184.6
6,837.8
128
128
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Notes to the financial statements continued
Distribution
UK
Americas
Retail
UK
and
APAC
£m
and
Europe
£m
and
Total
Africa
Distribution
APAC
Europe
£m
£m
£m
£m
Total
Retail
£m
Total
£m
1,902.6 1,120.2
797.1 3,819.9
9.4 3,008.5 3,017.9 6,837.8
Operating profit before exceptional items
80.0
25.3
34.4
139.7
0.4
25.4
25.8
165.5
Operating exceptional items
Operating loss after exceptional items
Share of profit after tax of joint ventures and associates
Loss before finance and tax
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. Revenue is further analysed as follows:
2020
Revenue
Total revenue
Results
Finance income
Finance costs
Loss before tax
Tax
Loss for the year
2020
UK
Russia
Australia
Rest of the world
Group
(257.1)
(91.6)
–
(91.6)
14.4
(51.0)
(128.2)
(9.0)
(137.2)
£m
1,978.9
835.6
838.7
3,184.6
6,837.8
128
Inchcape plc Annual Report and Accounts 2020
1 Segmental analysis continued
1 Segmental analysis continued
2020
Segment assets and liabilities
Segment assets
Other current assets
Other non-current assets
Segment liabilities
Other liabilities
Net assets
Distribution
UK
and
Europe
£m
Americas
and
Africa
£m
Total
Distribution
£m
APAC
£m
APAC
£m
Retail
UK
and
Europe
£m
Total
Retail
£m
Total
£m
402.7
281.6
361.7
1,046.0
(602.1) (295.8) (299.3) (1,197.2)
–
618.4
618.4 1,664.4
515.3
1,454.7
– (566.4) (566.4) (1,763.6)
(787.1)
1,083.7
Segment assets include net inventory, receivables and derivative assets. Segment liabilities include payables, provisions and
derivative liabilities.
2020
Other segment items
Capital expenditure:
– Property, plant and equipment
– Interest in leased vehicles
– Right-of-use assets
– Intangible assets
Depreciation:
– Property, plant and equipment
– Interest in leased vehicles
– Right-of-use assets
Amortisation of intangible assets
Impairment of goodwill
Impairment of distribution agreements
Impairment of other intangible assets
Impairment of property, plant and equipment
Impairment of right-of-use assets
Net provisions charged / (credited) to the
consolidated income statement
Distribution
UK
and
Europe
£m
Americas
and
Africa
£m
Total
Distribution
£m
APAC
£m
APAC
£m
Retail
UK
and
Europe
£m
Total
Retail
£m
Total
£m
6.0
2.3
10.4
7.3
9.5
3.1
28.5
8.5
11.1
–
5.7
9.7
24.7
2.4
0.7
3.4
3.3
4.0
0.1
4.7
3.5
–
–
1.2
1.2
–
9.2
0.1
3.5
3.5
9.3
0.8
10.6
3.3
6.2
31.2
1.5
1.4
0.2
17.6
3.1
17.3
14.1
22.8
4.0
43.8
15.3
17.3
31.2
8.4
12.3
24.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9.9
–
5.3
6.4
13.1
0.1
10.4
3.5
80.2
–
9.4
30.4
8.4
9.9
–
5.3
6.4
13.1
0.1
10.4
3.5
80.2
–
9.4
30.4
8.4
27.5
3.1
22.6
20.5
35.9
4.1
54.2
18.8
97.5
31.2
17.8
42.7
33.3
15.9
4.7
11.8
32.4
–
(3.4)
(3.4)
29.0
Net provisions include inventory, trade receivables impairment and other liability provisions.
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 129
129
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
1 Segmental analysis continued
2019 (restated)
Revenue
Total revenue
Results
Operating profit before exceptional items
Operating exceptional items
Operating profit after exceptional items
Share of profit after tax of joint ventures and associates
Profit before finance and tax
Finance income
Finance costs
Profit before tax
Tax
Profit for the year
Distribution
UK
and
Europe
£m
APAC
£m
Americas
and Africa
£m
Total
Distribution
£m
APAC
£m
Retail
UK
and
Europe
£m
Total
Retail
£m
Total
£m
2,593.4 1,329.6
993.5
4,916.5
431.5 4,031.7 4,463.2 9,379.7
226.7
41.7
65.0
333.4
7.5
32.2
39.7
373.1
75.5
448.6
0.3
448.9
24.1
(71.2)
401.8
(73.1)
328.7
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. Revenue is further analysed as follows:
2019
UK
Russia
Australia
Rest of the world
Group
2019 (restated)
Segment assets and liabilities
Segment assets
Other current assets
Other non-current assets
Segment liabilities
Other liabilities
Net assets
Distribution
UK
and
Europe
£m
APAC
£m
Americas
and Africa
£m
Total
Distribution
£m
APAC
£m
Retail
UK
and
Europe
£m
504.3
332.5
413.2
1,250.0
30.0
810.9
(746.9)
(305.3)
(297.9) (1,350.1)
(17.8)
(716.6)
£m
2,808.8
1,026.8
1,287.0
4,257.1
9,379.7
Total
Retail
£m
Total
£m
840.9
2,090.9
636.8
1,735.1
(734.4) (2,084.5)
(1,079.7)
1,298.6
Segment assets include net inventory, receivables and derivative assets. Segment liabilities include payables, provisions and
derivative liabilities.
130
130
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Notes to the financial statements continued
Distribution
UK
Retail
UK
and
and
Americas
Total
APAC
Europe
and Africa
Distribution
APAC
Europe
£m
£m
£m
£m
£m
£m
Total
Retail
£m
Total
£m
2,593.4 1,329.6
993.5
4,916.5
431.5 4,031.7 4,463.2 9,379.7
Operating profit before exceptional items
226.7
41.7
65.0
333.4
7.5
32.2
39.7
Operating exceptional items
Operating profit after exceptional items
Share of profit after tax of joint ventures and associates
Profit before finance and tax
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. Revenue is further analysed as follows:
APAC
£m
Europe
and Africa
Distribution
£m
£m
£m
APAC
£m
Americas
Total
Total
Retail
£m
Total
£m
Retail
UK
and
Europe
£m
Distribution
UK
and
504.3
332.5
413.2
1,250.0
30.0
810.9
840.9
2,090.9
(746.9)
(305.3)
(297.9) (1,350.1)
(17.8)
(716.6)
(734.4) (2,084.5)
Segment assets include net inventory, receivables and derivative assets. Segment liabilities include payables, provisions and
2019 (restated)
Revenue
Total revenue
Results
Finance income
Finance costs
Profit before tax
Tax
Profit for the year
2019
UK
Russia
Australia
Rest of the world
Group
2019 (restated)
Segment assets and liabilities
Segment assets
Other current assets
Other non-current assets
Segment liabilities
Other liabilities
Net assets
derivative liabilities.
373.1
75.5
448.6
0.3
448.9
24.1
(71.2)
401.8
(73.1)
328.7
£m
2,808.8
1,026.8
1,287.0
4,257.1
9,379.7
636.8
1,735.1
(1,079.7)
1,298.6
130
Inchcape plc Annual Report and Accounts 2020
1 Segmental analysis continued
1 Segmental analysis continued
2019 (Restated)
Other segment items
Capital expenditure:
– Property, plant and equipment
– Interest in leased vehicles
– Right-of-use assets
– Intangible assets
Depreciation:
– Property, plant and equipment
– Interest in leased vehicles
– Right-of-use assets
Amortisation of intangible assets
Impairment of other intangible assets
Impairment of property, plant and equipment
Impairment of right-of-use assets
Impairment of disposal group
Net provisions charged / (credited) to the
consolidated income statement
Distribution
UK
and
Europe
£m
APAC
£m
Americas
and Africa
£m
Total
Distribution
£m
APAC
£m
Retail
UK
and
Europe
£m
Total
Retail
£m
Total
£m
6.0
7.5
6.3
8.3
12.2
4.1
34.7
6.5
–
1.8
3.8
–
4.2
0.3
0.2
4.1
3.4
–
4.6
2.2
–
–
–
–
10.3
0.5
5.0
5.1
8.5
1.4
11.9
1.7
–
–
–
–
20.5
8.3
11.5
17.5
24.1
5.5
51.2
10.4
–
1.8
3.8
–
0.4
–
4.7
2.8
2.0
–
3.7
0.1
0.7
–
4.9
–
22.4
0.8
10.1
4.9
16.5
1.4
11.4
5.5
–
3.0
–
2.8
22.8
0.8
14.8
7.7
18.5
1.4
15.1
5.6
0.7
3.0
4.9
2.8
43.3
9.1
26.3
25.2
42.6
6.9
66.3
16.0
0.7
4.8
8.7
2.8
(1.5)
4.6
0.7
3.8
(1.4)
26.0
24.6
28.4
Net provisions include inventory, trade receivables impairment and other liability provisions.
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 131
131
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
2 Exceptional items
Goodwill and distribution agreement impairments (see note 11)
Other asset write-offs and impairments (see notes 11, 12 and 13)
Inventory and other provisions
Disposal of businesses (see note 29)
Restructuring costs
Acquisition of businesses
Other operating exceptional items
Total exceptional operating items before tax
Exceptional tax (see note 8)
Total exceptional items
Total exceptional items are analysed as follows:
Exceptional cost of sales
Exceptional net operating expenses
Exceptional tax (see note 8)
Total exceptional items
2020
£m
(128.7)
(94.3)
(11.9)
1.9
(28.4)
(4.1)
8.4
(257.1)
24.2
(232.9)
(11.6)
(245.5)
24.2
(232.9)
2019
£m
–
(21.9)
–
108.8
(8.9)
(2.5)
–
75.5
2.5
78.0
–
75.5
2.5
78.0
In the first half of the year, due to the initial impact of COVID-19 and the subsequent temporary closure of operations across the
Group’s many markets, impairment assessments were carried out using cash flow forecasts updated for latest available market
data and estimates of fair value less costs of disposal. As a result of these reviews, the Group recognised goodwill impairment
charges of £80.2m and £11.1m in the UK and Australia respectively. A further full impairment review was conducted across the
Group in connection with the results for the year ending 31 December 2020. The impact of the impairment assessment performed
was to recognise further impairment charges against the Americas – Suzuki CGU of £6.2m and £31.2m against goodwill and
distribution agreement assets respectively. Exceptional items also include asset impairments and write-offs of £94.3m following an
impairment review of site-based assets across the Group, primarily in the UK, Australia and Russia.
The Group sells New and Used vehicles which are subject to changing consumer demands. As a direct result of the restrictions
imposed in various markets in relation to the COVID-19 pandemic and the subsequent lifting of those restrictions, where relevant,
our ability to sell certain vehicles has been significantly impacted. Accordingly, management have reviewed the level and quality of
inventory and applied assumptions in relation to estimated selling prices, together with costs to be incurred in marketing and selling
those vehicles. As a result, additional inventory provisions to write-down inventory to net realisable value have been required. In
certain instances, management have determined that inventory provisions have been required that are directly attributable to the
COVID-19 pandemic, principally in relation to inventory in the Peugeot Citroën Distribution business in Australia and commercial
vehicles in Ecuador. The impact of COVID-19 on the Australian economy has been severe and, as disclosed in relation to goodwill
and other non-financial assets, there has been a material decline in the forecast performance of the Peugeot Citroën Distribution
business. Estimated selling prices have been revised downwards which has required a provision to be recognised to write-down
inventory to net realisable value. In Ecuador, the COVID-19 pandemic has impacted the economy and had a significant impact
on the market for buses with operators delaying purchasing decisions and a build-up of inventory by competitors resulting in falling
prices. Management have therefore revised estimated selling prices downwards and recognised a provision to write-down bus
chassis inventory to estimated net realisable value. Management have concluded that the provisions recognised in these markets
are directly attributable to the COVID-19 pandemic and have therefore been disclosed as an exceptional charge.
In addition, in Guam and Saipan, the Group sells vehicles which are financed through loans offered by banks. In some
circumstances of consumer default, the Group carries an obligation to repurchase the vehicle from the bank on repossession,
absorbing any loss or gain between net realisable value and the outstanding amount on the loan (up to a cap). Due to the impact
of COVID-19 on the tourism industry in those markets, management have concluded that an increase in provision for losses totalling
£1.3m is required following an expected increase in consumer default rate which is directly attributable to the COVID-19 pandemic
and therefore should be disclosed as an exceptional charge
The Group has continued to optimise its Retail market portfolio and an exceptional operating profit of £1.9m has been recognised,
mainly related to the disposal of Retail sites in the UK and Australia.
Due to the expected medium-term impact of COVID-19 on the Group’s operations a proposal was presented to the Board to
rationalise and restructure operations. This proposal was approved by the Board and has led to significant restructuring activity
being undertaken by the Group, the costs incurred being recognised as exceptional costs in line with the Group’s policy.
Restructuring costs have only been recognised once formal plans are in place and their implementation has commenced or
announced to those affected. Furthermore, additional restructuring costs have been recognised, mainly in relation to Group-wide
transformation projects impacting across the front and back office, encompassing a review of organisational structures, internal
processes and the Group’s physical setup. Execution of the Group-wide restructuring commenced in the first half of 2020 and
significant progress has been made by the year-end, with some COVID-19 related restructuring activities to continue into 2021.
132
132
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Notes to the financial statements continued
2 Exceptional items
Goodwill and distribution agreement impairments (see note 11)
Other asset write-offs and impairments (see notes 11, 12 and 13)
Inventory and other provisions
Disposal of businesses (see note 29)
Restructuring costs
Acquisition of businesses
Other operating exceptional items
Total exceptional operating items before tax
Exceptional tax (see note 8)
Total exceptional items
Total exceptional items are analysed as follows:
Exceptional cost of sales
Exceptional net operating expenses
Exceptional tax (see note 8)
Total exceptional items
2020
£m
(128.7)
(94.3)
(11.9)
1.9
(28.4)
(4.1)
8.4
(257.1)
24.2
(232.9)
(11.6)
(245.5)
24.2
(232.9)
2019
£m
(21.9)
–
–
108.8
(8.9)
(2.5)
–
75.5
2.5
78.0
–
75.5
2.5
78.0
In the first half of the year, due to the initial impact of COVID-19 and the subsequent temporary closure of operations across the
Group’s many markets, impairment assessments were carried out using cash flow forecasts updated for latest available market
data and estimates of fair value less costs of disposal. As a result of these reviews, the Group recognised goodwill impairment
charges of £80.2m and £11.1m in the UK and Australia respectively. A further full impairment review was conducted across the
Group in connection with the results for the year ending 31 December 2020. The impact of the impairment assessment performed
was to recognise further impairment charges against the Americas – Suzuki CGU of £6.2m and £31.2m against goodwill and
distribution agreement assets respectively. Exceptional items also include asset impairments and write-offs of £94.3m following an
impairment review of site-based assets across the Group, primarily in the UK, Australia and Russia.
The Group sells New and Used vehicles which are subject to changing consumer demands. As a direct result of the restrictions
imposed in various markets in relation to the COVID-19 pandemic and the subsequent lifting of those restrictions, where relevant,
our ability to sell certain vehicles has been significantly impacted. Accordingly, management have reviewed the level and quality of
inventory and applied assumptions in relation to estimated selling prices, together with costs to be incurred in marketing and selling
those vehicles. As a result, additional inventory provisions to write-down inventory to net realisable value have been required. In
certain instances, management have determined that inventory provisions have been required that are directly attributable to the
COVID-19 pandemic, principally in relation to inventory in the Peugeot Citroën Distribution business in Australia and commercial
vehicles in Ecuador. The impact of COVID-19 on the Australian economy has been severe and, as disclosed in relation to goodwill
and other non-financial assets, there has been a material decline in the forecast performance of the Peugeot Citroën Distribution
business. Estimated selling prices have been revised downwards which has required a provision to be recognised to write-down
inventory to net realisable value. In Ecuador, the COVID-19 pandemic has impacted the economy and had a significant impact
on the market for buses with operators delaying purchasing decisions and a build-up of inventory by competitors resulting in falling
prices. Management have therefore revised estimated selling prices downwards and recognised a provision to write-down bus
chassis inventory to estimated net realisable value. Management have concluded that the provisions recognised in these markets
are directly attributable to the COVID-19 pandemic and have therefore been disclosed as an exceptional charge.
In addition, in Guam and Saipan, the Group sells vehicles which are financed through loans offered by banks. In some
circumstances of consumer default, the Group carries an obligation to repurchase the vehicle from the bank on repossession,
absorbing any loss or gain between net realisable value and the outstanding amount on the loan (up to a cap). Due to the impact
of COVID-19 on the tourism industry in those markets, management have concluded that an increase in provision for losses totalling
£1.3m is required following an expected increase in consumer default rate which is directly attributable to the COVID-19 pandemic
and therefore should be disclosed as an exceptional charge
The Group has continued to optimise its Retail market portfolio and an exceptional operating profit of £1.9m has been recognised,
mainly related to the disposal of Retail sites in the UK and Australia.
Due to the expected medium-term impact of COVID-19 on the Group’s operations a proposal was presented to the Board to
rationalise and restructure operations. This proposal was approved by the Board and has led to significant restructuring activity
being undertaken by the Group, the costs incurred being recognised as exceptional costs in line with the Group’s policy.
Restructuring costs have only been recognised once formal plans are in place and their implementation has commenced or
announced to those affected. Furthermore, additional restructuring costs have been recognised, mainly in relation to Group-wide
transformation projects impacting across the front and back office, encompassing a review of organisational structures, internal
processes and the Group’s physical setup. Execution of the Group-wide restructuring commenced in the first half of 2020 and
significant progress has been made by the year-end, with some COVID-19 related restructuring activities to continue into 2021.
132
Inchcape plc Annual Report and Accounts 2020
2 Exceptional items continued
During the year exceptional operating costs of £4.1m have been incurred in connection with the acquisition and integration of
businesses. These primarily relate to the Daimler businesses acquired in South and Central America. Other operating items of £8.4m
includes the recycling of a cumulative gain previously recorded in other comprehensive income (OCI) which arises due to the
reorganisation of the ownership structure for some of the Group’s operations in the APAC region.
In 2019, an exceptional operating profit of £108.8m was recognised related to the disposal of the Group’s Retail operations in
China and the Fleet Solutions business in the UK, together with several retail sites in Australia and the UK. As a direct result of the
Group’s optimisation of its Retail market portfolio, asset write-offs of £4.9m and impairments of £17.0m, including leasehold
improvements and right-of-use assets, and £8.9m of restructuring costs were incurred, principally following the disposal of several
Retail sites in the UK and Australia. The restructuring costs incurred comprised headcount reduction and costs associated with
exiting certain properties. During the year exceptional operating costs of £2.5m were incurred in connection with the acquisition
and integration of business, primarily the Krasta Auto business in Lithuania and the Autolider business in South America.
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
2020
£m
6,312.1
525.7
6,837.8
2019
£m
8,580.0
799.7
9,379.7
Sale of goods includes the sale of New and Used vehicles and the sale of parts where they are sold directly to the customer.
Provision of services includes financial services, as well as labour and parts provided in servicing vehicles.
b. Analysis of net operating expenses
Distribution costs
Administrative expenses
Other operating expenses / (income)
Net operating
expenses before
exceptional
items
2020
£m
Exceptional
items
2020
£m
Net
operating
expenses
2020
£m
Net operating
expenses before
exceptional
items
2019
£m
Exceptional
items
2019
£m
375.0
347.2
1.7
723.9
–
255.8
(10.3)
245.5
375.0
603.0
(8.6)
969.4
532.6
370.1
(3.7)
899.0
–
33.3
(108.8)
(75.5)
Net
operating
expenses
2019
£m
532.6
403.4
(112.5)
823.5
c. (Loss) / profit before tax is stated after the following charges / (credits):
Depreciation of tangible fixed assets:
– Property, plant and equipment
– Interest in leased vehicles
– Right-of-use assets
Amortisation of intangible assets
Impairment of goodwill
Impairment of distribution agreements
Impairment of other intangible assets
Impairment of property, plant and equipment
Impairment of right-of-use assets
Impairment of disposal group
Impairment of trade receivables
Loss / (profit) on sale of property, plant and equipment
Operating lease rentals – short-term leases
Operating lease rentals – variable lease payments
Rent concessions recognised
Sub-lease income of right-of-use assets
2020
£m
35.9
4.1
54.2
18.8
97.5
31.2
17.8
42.7
33.3
–
2.8
0.9
3.3
2.2
(1.1)
(0.7)
2019
£m
42.6
6.9
66.3
16.0
–
–
0.7
4.8
8.7
2.8
2.0
(0.5)
4.7
0.6
–
(0.8)
Loss on the sale of property, plant and equipment in 2020 relates to the sale of surplus assets in South America and the UK (2019 –
profit on sale of surplus assets in Australia and the UK).
The Group has utilised government support measures in the geographies in which it operates, including employee furlough
schemes. The total government grant income, predominantly received from the UK, Australia and Singapore governments,
recognised in the year in relation to these schemes was £30.8m.
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 133
133
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
3 Revenue and expenses continued
The Group also benefited from the business rates holiday for the retail sector in the UK of £2.6m.
Based on a decision taken by the Board, during the second half of the year, to reduce the level of government support received,
the majority of support was recognised in the period to 30 June 2020.
In addition, the Group has made use of government-backed tax deferral schemes, resulting in a benefit to net cash generated
from operating activities of £7.4m.
d. Auditor’s remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Group’s auditor at costs as
detailed below:
Audit services:
Fees payable to the Company’s auditor and its associates for the audit of the parent company and the
consolidated financial statements
Fees payable to the Company’s auditor and its associates for other services:
– The audit of the Company’s subsidiaries
– Audit related assurance services
– All other services
Total fees payable to the Company’s auditor
Audit fees – firms other than the Company’s auditor
e. Staff costs
Wages and salaries
Social security costs
Other pension costs
Share-based payment charge
2020
£m
2019
£m
0.6
3.1
0.3
0.1
4.1
0.1
2020
£m
443.7
41.6
24.3
3.3
512.9
0.5
3.0
0.1
0.2
3.8
0.2
2019
£m
558.5
48.4
26.0
6.1
639.0
Other pension costs correspond to the current service charge and past service cost in relation to defined benefit schemes 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 74 to 95 of this document. Information on compensation of
key management personnel is set out in note 32b.
f. Average monthly number of employees
APAC
UK and Europe
Americas and Africa
Total operational
Central
1. See note 1.
Distribution
2019
Number
(Restated)1
3,528
1,664
3,670
8,862
2020
Number
3,417
1,636
3,493
8,546
Retail
2019
Number
(Restated)1
733
8,454
–
9,187
2020
Number
47
7,161
–
7,208
Total
2019
Number
(Restated)1
4,261
10,118
3,670
18,049
156
18,205
2020
Number
3,464
8,797
3,493
15,754
161
15,915
134
134
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
3 Revenue and expenses continued
The Group also benefited from the business rates holiday for the retail sector in the UK of £2.6m.
4 Share-based payments
The terms and conditions of the Group’s share-based payment plans are detailed in the Directors’ Report on Remuneration.
Based on a decision taken by the Board, during the second half of the year, to reduce the level of government support received,
the majority of support was recognised in the period to 30 June 2020.
The charge arising from awards granted under share-based payment plans was £3.3m (2019 – £6.1m), all of which was
equity-settled.
In addition, the Group has made use of government-backed tax deferral schemes, resulting in a benefit to net cash generated
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:
During the year the Group (including its overseas subsidiaries) obtained the following services from the Group’s auditor at costs as
2020
Outstanding at 1 January
Granted
Exercised
Lapsed
Outstanding at 31 December
Exercisable at 31 December
2019
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
£5.11
£3.77
£5.39
£5.02
£4.31
£6.66
4,886,187
2,342,210
(357,861)
(1,486,381)
5,384,155
256,048
3,226
–
(3,224)
(2)
–
–
2,368,907
1,757,394
(50,589)
(1,290,944)
2,784,768
124,733
Weighted average
exercise price*
Performance
Share Plan
Executive Share
Option Plan
Save As You
Earn Plan
£5.61
£4.59
£4.79
£5.70
£5.11
£5.54
4,708,409
2,182,473
(827,423)
(1,177,272)
4,886,187
148,366
5,841
–
(2,612)
(3)
3,226
3,226
2,576,229
1,432,380
(404,953)
(1,234,749)
2,368,907
84,162
960,156
575,199
(167,162)
(391,070)
977,123
34,292
Other
Share Plans
1,253,929
489,364
(457,527)
(325,610)
960,156
2,641
Other pension costs correspond to the current service charge and past service cost in relation to defined benefit schemes 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 74 to 95 of this document. Information on compensation of
key management personnel is set out in note 32b.
f. Average monthly number of employees
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
2020 and 31 December 2019:
Performance
Share Plan
Save As You
Earn Plan
Other
Share Plans
2020
2019
2020
2019
2020
2019
512.9
639.0
The range of exercise prices for options outstanding at the end of the year was £3.77 to £6.66 (2019 – £3.10 to £6.66). See note 25
for further details.
* 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 2020 is 2.5 years (2019 – 2.7 years).
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
£5.14
£4.84
n/a
3.0 years
n/a
£5.95
£6.08
n/a
3.0 years
n/a
3.0 years 3.0 years
n/a
n/a
£5.95
n/a
n/a
£5.14
£4.46
£6.66
£3.77
3.0 years
31.4%
3.2 years
1.0%
3.8%
£0.91
£6.27
£6.32
£4.59
3.0 years
23.4%
3.2 years
1.0%
4.3%
£1.38
£5.71
£4.88
n/a
2.8 years
n/a
2.8 years
n/a
n/a
£5.71
£6.19
£6.02
n/a
2.8 years
n/a
2.8 years
n/a
n/a
£6.19
* 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 2020 or 2019.
The expected life and volatility of the options are based upon historical data.
Notes to the financial statements continued
Fees payable to the Company’s auditor and its associates for the audit of the parent company and the
consolidated financial statements
Fees payable to the Company’s auditor and its associates for other services:
from operating activities of £7.4m.
d. Auditor’s remuneration
detailed below:
Audit services:
– The audit of the Company’s subsidiaries
– Audit related assurance services
– All other services
Total fees payable to the Company’s auditor
Audit fees – firms other than the Company’s auditor
e. Staff costs
Wages and salaries
Social security costs
Other pension costs
Share-based payment charge
2020
£m
2019
£m
0.6
3.1
0.3
0.1
4.1
0.1
2020
£m
443.7
41.6
24.3
3.3
0.5
3.0
0.1
0.2
3.8
0.2
2019
£m
558.5
48.4
26.0
6.1
APAC
UK and Europe
Americas and Africa
Total operational
Central
1. See note 1.
Number
(Restated)1
Number
(Restated)1
Number
(Restated)1
2020
Number
Distribution
2019
Number
3,528
1,664
3,670
8,862
2020
3,417
1,636
3,493
8,546
Retail
2019
Number
733
8,454
–
2020
47
7,161
–
7,208
9,187
15,754
Total
2019
4,261
10,118
3,670
18,049
156
3,464
8,797
3,493
161
15,915
18,205
134
Inchcape plc Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
135
Inchcape Annual Report and Accounts 2020 135
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
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 Inchcape Motors Pension Scheme (‘IMPS’) in the UK is the Group’s main defined benefit pension scheme. It is comprised of the
Group, Motors, Normand and Cash+ sections. The Group, Motors and Normand sections provide benefits linked to the final salary
of members, are closed to new members and largely closed to future benefit accrual.
The Cash+ section is a defined benefit cash balance scheme. Following a consultation process with relevant employees this section
closed to future benefit accrual on 31 December 2020. From 1 January 2021 UK employees are offered membership of the
Inchcape Retirement Savings Plan, a defined contribution workplace personal pension scheme, which is designed to comply with
auto enrolment legislation.
The Group also operates the Inchcape Overseas Pension Scheme which is non-UK registered.
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 bears risks in relation
to its final salary schemes, notably relating to investment performance, interest rates, inflation and members’ life expectancies.
There is potential for these risks to harm the funding position of the schemes. If the schemes were to be in deficit then additional
contributions may be required from the Group. A number of exercises have been undertaken to mitigate these key funding risks.
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 up
to 31 December 2020. The Group underwrites the investment and interest rate risk to normal retirement age (65). Inflation and
mortality risks associated with benefits are borne solely by the members.
Defined contribution schemes like the Inchcape Retirement Savings Plan, which commenced on 1 January 2021, see members’
individual accounts credited with employee and employer contributions which are then invested to provide a pension pot on
retirement. The Group does not underwrite investment or other risks for this plan.
Governance
Our UK schemes are registered with HMRC and comply fully with the regulatory framework published by the UK Pensions Regulator.
IMPS is established under trust law and has a trustee board that runs the scheme in accordance with the Trust Deed and Rules and
relevant legislation. The trustee board is comprised of two independent trustee companies appointed by the Group. The Trustees
are required to act in the best interest of the members and have responsibility for the scheme’s governance. The Trustees consult
with the Group over decisions relating to matters such as funding and investments.
The Inchcape Retirement Savings Plan (a workplace personal pension scheme) has an external pension provider with its own
governance committee.
The Group also has some minor unfunded arrangements relating to post-retirement health and medical plans in respect of past
employees.
136
136
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Notes to the financial statements continued
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 Inchcape Motors Pension Scheme (‘IMPS’) in the UK is the Group’s main defined benefit pension scheme. It is comprised of the
Group, Motors, Normand and Cash+ sections. The Group, Motors and Normand sections provide benefits linked to the final salary
of members, are closed to new members and largely closed to future benefit accrual.
The Cash+ section is a defined benefit cash balance scheme. Following a consultation process with relevant employees this section
closed to future benefit accrual on 31 December 2020. From 1 January 2021 UK employees are offered membership of the
Inchcape Retirement Savings Plan, a defined contribution workplace personal pension scheme, which is designed to comply with
The Group also operates the Inchcape Overseas Pension Scheme which is non-UK registered.
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 bears risks in relation
to its final salary schemes, notably relating to investment performance, interest rates, inflation and members’ life expectancies.
There is potential for these risks to harm the funding position of the schemes. If the schemes were to be in deficit then additional
contributions may be required from the Group. A number of exercises have been undertaken to mitigate these key funding risks.
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 up
to 31 December 2020. The Group underwrites the investment and interest rate risk to normal retirement age (65). Inflation and
mortality risks associated with benefits are borne solely by the members.
Defined contribution schemes like the Inchcape Retirement Savings Plan, which commenced on 1 January 2021, see members’
individual accounts credited with employee and employer contributions which are then invested to provide a pension pot on
retirement. The Group does not underwrite investment or other risks for this plan.
Governance
Our UK schemes are registered with HMRC and comply fully with the regulatory framework published by the UK Pensions Regulator.
IMPS is established under trust law and has a trustee board that runs the scheme in accordance with the Trust Deed and Rules and
relevant legislation. The trustee board is comprised of two independent trustee companies appointed by the Group. The Trustees
are required to act in the best interest of the members and have responsibility for the scheme’s governance. The Trustees consult
with the Group over decisions relating to matters such as funding and investments.
The Inchcape Retirement Savings Plan (a workplace personal pension scheme) has an external pension provider with its own
The Group also has some minor unfunded arrangements relating to post-retirement health and medical plans in respect of past
governance committee.
employees.
136
Inchcape plc Annual Report and Accounts 2020
5 Pensions and other post-retirement benefits continued
Scheme specific cash obligation / investment detail
Inchcape Motors Pension Scheme
Group, Motors and Normand sections (closed sections)
The Group considers two measures of the pension deficit. The accounting position is shown on the Group balance sheet. The
funding position, calculated at the triennial actuarial valuation, is used to agree contributions made to IMPS. The Trustees have
finalised the latest actuarial valuations as at 5 April 2019 for the four sections of IMPS. As part of the valuation process the Trustees
and Group have agreed future levels of contributions required to be made by the Group to IMPS.
The last completed actuarial valuations for the Group, Motors and Normand sections were carried out at 5 April 2019 on a market-
related basis and determined in accordance with the advice of the Scheme Actuary based on the defined accrued benefit
method. The actuarial valuation determined that the duration of the liabilities was approximately 17 years and that an aggregate
deficit of £18.3m existed. The Group currently contributes £0.6m per annum towards the administrative costs of running these
sections. For the Normand section, the Group also currently pays deficit reduction contributions of £1.2m per annum, rising by
3.0% per annum up until 5 April 2025 (at which point the funding shortfall is expected to be eliminated).
Each section’s investment strategy sees it holding a proportion of its assets in matching assets (broadly 75% for the Group section,
45% for the Motors section and 46% for the Normand 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 expected 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 section’s liabilities and include equities, diversified growth funds and property.
Cash+ section
This scheme is a defined benefit scheme under which members accrued benefits up until 31 December 2020. The latest actuarial
valuation was carried out at 5 April 2019 on a market-related basis and determined in accordance with the advice of the Scheme
Actuary based on the projected unit method. The valuation showed a funding deficit of £17.6m, with the Trustee expecting the
shortfall to be removed by deficit recovery contributions and returns on the assets held. Under the agreed Schedule of Contributions
the Group will contribute approximately £2.8m per annum in deficit recovery contributions up until 5 April 2028 (at which point the
funding shortfall is expected to be eliminated) and £0.2m per annum towards the administrative costs of running the scheme.
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 split equally
between multi-factor equities and emerging market multi-asset funds.
Inchcape Overseas Pension Scheme
This scheme is managed from Guernsey and is subject to regulations similar to the UK. 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 2018 and determined in
accordance with the advice of the Scheme Actuary 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 approximately 77% funded on
a prudent funding basis. To make good the funding deficit of £16.2m, it has been agreed that deficit contributions of £1.5m per
annum will be paid by means of an annual lump sum for 10 years, ending with the payment due in July 2029. The first payment
at this new level was paid on 1 July 2020. Additional contributions in respect of expenses of £0.2m per annum will also be made.
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 £5.9m (2019 – £7.1m). There are no outstanding
contributions at 31 December 2020 (2019 – 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.
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 137
137
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
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
– Medical inflation
United Kingdom
Overseas
2020
%
3.0
2.9
1.3
3.0
1.8
6.0
2019
%
3.0
2.9
2.0
2.9
1.8
6.0
2020
%
3.5
1.6
0.6
1.5
n/a
n/a
2019
%
4.0
1.8
1.8
1.9
n/a
n/a
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 22.5 years (2019 – 23.0 years) for current pensioners and 23.9 years
(2019 – 24.4 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:
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
United Kingdom
Overseas
2020
£m
(949.7)
971.8
22.1
(0.5)
21.6
2019
£m
(872.8)
887.6
14.8
(0.5)
14.3
2020
£m
(41.3)
41.2
(0.1)
(1.9)
(2.0)
2019
£m
(46.0)
43.0
(3.0)
(1.8)
(4.8)
2020
£m
(991.0)
1,013.0
22.0
(2.4)
19.6
99.9
(78.3)
21.6
78.4
(64.1)
14.3
1.1
(3.1)
(2.0)
0.3
(5.1)
(4.8)
101.0
(81.4)
19.6
The amounts recognised in the consolidated income statement are as follows:
Current service cost
Past service cost
Scheme expenses
Interest expense on plan liabilities
Interest income on plan assets
United Kingdom
Overseas
2020
£m
(17.1)
(0.4)
(1.4)
(16.6)
17.1
(18.4)
2019
£m
(16.1)
–
(1.4)
(21.0)
23.8
(14.7)
2020
£m
(0.9)
–
–
(0.6)
0.5
(1.0)
2019
£m
(2.8)
–
(0.1)
(0.9)
0.8
(3.0)
2020
£m
(18.0)
(0.4)
(1.4)
(17.2)
17.6
(19.4)
Total
2019
£m
(918.8)
930.6
11.8
(2.3)
9.5
78.7
(69.2)
9.5
Total
2019
£m
(18.9)
–
(1.5)
(21.9)
24.6
(17.7)
138
138
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Notes to the financial statements continued
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 22.5 years (2019 – 23.0 years) for current pensioners and 23.9 years
(2019 – 24.4 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:
Rate of increase in salaries
Rate of increase in pensions
Discount rate
Rate of inflation:
– Retail price index
– Consumer price index
– Medical inflation
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
Current service cost
Past service cost
Scheme expenses
Interest expense on plan liabilities
Interest income on plan assets
United Kingdom
Overseas
Overseas
2019
£m
(41.3)
(46.0)
(991.0)
(918.8)
1,013.0
930.6
2020
%
3.0
2.9
1.3
3.0
1.8
6.0
2020
£m
41.2
(0.1)
(1.9)
(2.0)
1.1
(3.1)
(2.0)
2020
£m
(0.9)
–
–
(0.6)
0.5
(1.0)
2019
%
3.0
2.9
2.0
2.9
1.8
6.0
43.0
(3.0)
(1.8)
(4.8)
0.3
(5.1)
(4.8)
2019
£m
(2.8)
–
(0.1)
(0.9)
0.8
(3.0)
2020
%
3.5
1.6
0.6
1.5
n/a
n/a
2020
£m
22.0
(2.4)
19.6
101.0
(81.4)
19.6
2020
£m
(18.0)
(0.4)
(1.4)
(17.2)
17.6
(19.4)
2019
%
4.0
1.8
1.8
1.9
n/a
n/a
Total
2019
£m
11.8
(2.3)
9.5
78.7
(69.2)
9.5
Total
2019
£m
(18.9)
–
(1.5)
(21.9)
24.6
(17.7)
United Kingdom
2020
£m
(949.7)
971.8
22.1
(0.5)
21.6
2019
£m
(872.8)
887.6
14.8
(0.5)
14.3
99.9
(78.3)
21.6
78.4
(64.1)
14.3
2020
£m
(17.1)
(0.4)
(1.4)
(16.6)
17.1
(18.4)
2019
£m
(16.1)
–
(1.4)
(21.0)
23.8
(14.7)
The amounts recognised in the consolidated income statement are as follows:
United Kingdom
Overseas
138
Inchcape plc Annual Report and Accounts 2020
5 Pensions and other post-retirement benefits continued
The principal weighted average assumptions used by the actuaries were:
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 (losses) / gains
– Changes in demographic assumptions
– Changes in financial assumptions
Actuarial gains on assets:
– Experience gains
Analysis of the movement in the net asset / (liability):
At 1 January
Amount recognised in the consolidated income
statement
Contributions by employer
Actuarial gains / (losses) recognised in the year
Effect of foreign exchange rates
At 31 December
United Kingdom
2020
£m
2019
£m
2020
£m
Overseas
2019
£m
2020
£m
Total
2019
£m
(4.1)
27.2
(100.1)
(10.3)
(5.2)
(123.6)
88.8
11.8
64.7
(74.4)
0.5
–
(2.0)
4.5
3.0
0.7
(0.2)
(0.4)
2.6
2.7
(3.6)
27.2
(102.1)
(9.6)
(5.4)
(124.0)
93.3
14.8
67.3
(71.7)
United Kingdom
Overseas
2020
£m
14.3
(18.4)
13.9
11.8
–
21.6
2019
£m
88.4
(14.7)
15.0
(74.4)
–
14.3
2020
£m
(4.8)
(1.0)
1.0
3.0
(0.2)
(2.0)
2019
£m
(6.5)
(3.0)
1.6
2.7
0.4
(4.8)
Changes in the present value of the defined benefit obligation are as follows:
At 1 January
Current service cost
Past service cost
Interest expense on plan liabilities
Actuarial gains / (losses):
– Experience (losses) / gains
– Changes in demographic assumptions
– Changes in financial assumptions
Contributions by employees
Benefits paid
Plan settlements
Effect of foreign exchange rate changes
At 31 December
United Kingdom
Overseas
2020
£m
(873.3)
(17.1)
(0.4)
(16.6)
(4.1)
27.2
(100.1)
(0.3)
34.5
–
–
(950.2)
2019
£m
(727.6)
(16.1)
–
(21.0)
(10.3)
(5.2)
(123.6)
(0.2)
30.7
–
–
(873.3)
2020
£m
(47.8)
(0.9)
–
(0.6)
0.5
–
(2.0)
–
5.8
1.1
0.7
(43.2)
2019
£m
(51.5)
(2.8)
–
(0.9)
0.7
(0.2)
(0.4)
–
4.6
0.7
2.0
(47.8)
2020
£m
9.5
(19.4)
14.9
14.8
(0.2)
19.6
2020
£m
(921.1)
(18.0)
(0.4)
(17.2)
(3.6)
27.2
(102.1)
(0.3)
40.3
1.1
0.7
(993.4)
Total
2019
£m
81.9
(17.7)
16.6
(71.7)
0.4
9.5
Total
2019
£m
(779.1)
(18.9)
–
(21.9)
(9.6)
(5.4)
(124.0)
(0.2)
35.3
0.7
2.0
(921.1)
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 139
139
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
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 gains:
– Experience gains
Contributions by employer
Contributions by employees
Benefits paid
Plan settlements
Effect of foreign exchange rate changes
At 31 December
United Kingdom
Overseas
2020
£m
887.6
17.1
(1.4)
88.8
13.9
0.3
(34.5)
–
–
971.8
2019
£m
816.0
23.8
(1.4)
64.7
15.0
0.2
(30.7)
–
–
887.6
2020
£m
43.0
0.5
–
4.5
1.0
–
(5.8)
(1.1)
(0.9)
41.2
2019
£m
45.0
0.8
(0.1)
2.6
1.6
–
(4.6)
(0.7)
(1.6)
43.0
2020
£m
930.6
17.6
(1.4)
93.3
14.9
0.3
(40.3)
(1.1)
(0.9)
1,013.0
At the end of the reporting period, the percentages of the plan assets by category were as follows:
Equities (quoted)
Corporate bonds (quoted)
Investment funds (quoted)
Government bonds
Investment funds (unquoted)
Other (quoted)
Other (unquoted)
United Kingdom
Overseas
2020
6.1%
–
–
–
58.1%
–
35.8%
100%
2019
2020
2019
2020
5.9%
–
–
–
62.4%
–
31.7%
100.0%
49.8%
40.8%
–
1.0%
–
2.2%
6.2%
100%
67.4%
19.3%
0.2%
–
–
5.1%
8.0%
100.0%
7.9%
1.7%
–
–
55.7%
0.1%
34.6%
100%
Total
2019
£m
861.0
24.6
(1.5)
67.3
16.6
0.2
(35.3)
(0.7)
(1.6)
930.6
Total
2019
8.8%
0.9%
–
–
59.5%
0.2%
30.6%
100.0%
The investments shown as quoted equities and bonds are held through funds where the underlying investments of the fund are
quoted. Investment funds and other assets include equities, bonds, property, derivatives and liability driven investments. Virtually all
the equities and bonds held within the investment funds have prices in active markets. Derivatives, property and liability driven
investments can be classified as level 2 instruments.
The schemes had no directly held employer related investment during the reporting period. The schemes’ investment managers
may potentially hold a small investment in Inchcape plc either through index weightings or stock selection (less than 0.5% of their
respective fund values).
140
140
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
5 Pensions and other post-retirement benefits continued
Changes in the fair value of the defined benefit asset are as follows:
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 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 Trustees reduce investment risk by increasing the allocation to defensive assets, which are designed to
better match scheme liabilities. However, the Trustees believe 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
Where relevant, 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 schemes 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 -0.5% (2019 – -0.25%)
Discount rate +0.5% (2019 – +0.25%)
RPI Inflation -0.25%
RPI Inflation +0.25%
CPI Inflation -0.25%
CPI Inflation +0.25%
Life expectancy + 1 year
United Kingdom
2020
£m
+87.5
-77.1
-12.1
+12.6
-10.4
+11.0
+43.0
2019
£m
+28.8
-26.3
-10.7
+12.0
-8.8
+10.4
+38.1
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 £6.5m to its UK defined benefit plans in 2021 under the prevailing Schedules of
Contributions (following the 5 April 2019 actuarial valuations for the Motors, Group, Cash+ and Normand sections of the Inchcape
Motors Pension Scheme and 31 March 2018 valuation for the Inchcape Overseas Pension Scheme). From 1 January 2021 (following
the closure of the Cash+ section to future benefit accrual on 31 December 2020) the Group will pay ongoing employer pension
contributions into the Inchcape Retirement Savings Plan (a defined contribution plan).
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 17 years for the UK schemes.
Notes to the financial statements continued
At 1 January
Interest income on plan assets
Scheme expenses
Actuarial gains:
– Experience gains
Contributions by employer
Contributions by employees
Benefits paid
Plan settlements
At 31 December
Effect of foreign exchange rate changes
Equities (quoted)
Corporate bonds (quoted)
Investment funds (quoted)
Government bonds
Investment funds (unquoted)
Other (quoted)
Other (unquoted)
United Kingdom
Overseas
2020
£m
887.6
17.1
(1.4)
88.8
13.9
0.3
2019
£m
816.0
23.8
(1.4)
64.7
15.0
0.2
(34.5)
(30.7)
–
–
–
–
–
–
–
–
–
–
–
–
58.1%
62.4%
35.8%
100%
31.7%
100.0%
2020
£m
43.0
0.5
–
4.5
1.0
–
(5.8)
(1.1)
(0.9)
41.2
2019
£m
45.0
0.8
(0.1)
2.6
1.6
–
(4.6)
(0.7)
(1.6)
43.0
2020
49.8%
40.8%
1.0%
–
–
2.2%
6.2%
100%
2019
67.4%
19.3%
0.2%
–
–
5.1%
8.0%
100.0%
United Kingdom
Overseas
2020
6.1%
2019
5.9%
2020
£m
930.6
17.6
(1.4)
93.3
14.9
0.3
(40.3)
(1.1)
(0.9)
2020
7.9%
1.7%
–
–
55.7%
0.1%
34.6%
100%
Total
2019
£m
861.0
24.6
(1.5)
67.3
16.6
0.2
(35.3)
(0.7)
(1.6)
930.6
Total
2019
8.8%
0.9%
–
–
59.5%
0.2%
30.6%
100.0%
971.8
887.6
1,013.0
At the end of the reporting period, the percentages of the plan assets by category were as follows:
The investments shown as quoted equities and bonds are held through funds where the underlying investments of the fund are
quoted. Investment funds and other assets include equities, bonds, property, derivatives and liability driven investments. Virtually all
the equities and bonds held within the investment funds have prices in active markets. Derivatives, property and liability driven
investments can be classified as level 2 instruments.
The schemes had no directly held employer related investment during the reporting period. The schemes’ investment managers
may potentially hold a small investment in Inchcape plc either through index weightings or stock selection (less than 0.5% of their
respective fund values).
140
Inchcape plc Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
141
Inchcape Annual Report and Accounts 2020 141
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
6 Finance income
Bank and other interest receivable
Net interest income on post-retirement plan assets and liabilities
Sub-lease finance income
Other finance income
Total finance income
7 Finance costs
Interest payable on bank borrowings
Interest payable on Private Placement
Finance costs on lease liabilities
Fair value adjustment on Private Placement
Fair value gain on cross currency interest rate swaps
Stock holding interest (see note 21)
Other finance costs
Capitalised borrowing costs
Total finance costs
2020
£m
11.6
0.4
0.5
1.9
14.4
2020
£m
6.5
6.6
13.9
–
–
18.5
5.5
–
51.0
2019
£m
17.2
2.7
0.6
3.6
24.1
2019
£m
12.9
6.9
20.0
3.3
(3.4)
27.6
4.0
(0.1)
71.2
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% (2019 – 2.9%).
8 Tax
Current tax:
– UK corporation tax
– Overseas tax
Adjustments to prior year liabilities:
– UK
– Overseas
Current tax
Deferred tax (see note 17)
Total tax charge
The total tax charge is analysed as follows:
– Tax charge on profit before exceptional items
– Tax credit on exceptional items
Total tax charge
2020
£m
(0.7)
47.9
47.2
(4.8)
(2.7)
39.7
(30.7)
9.0
33.2
(24.2)
9.0
2019
£m
0.1
78.6
78.7
4.4
(2.6)
80.5
(7.4)
73.1
75.6
(2.5)
73.1
Details of the exceptional items for the year can be found in note 2. Not all of the exceptional items will be taxable/allowable for tax
purposes. Therefore, the tax credit on exceptional items represents the total of the current and deferred tax on only those elements
that are assessed as taxable/allowable.
Factors affecting the tax expense for the year
The effective tax rate for the year after exceptional items is -7.0% (2019 – 18.2%). The underlying effective tax rate before the impact
of exceptional items is 25.8% (2019 – 23.2%). The weighted average tax rate is 25.9% (2019 – 20.6%). The weighted average tax rate
comprises the average statutory rates across the Group, weighted in proportion to accounting profits and losses.
On 25 April 2019, the European Commission issued a Decision that the Group Financing Exemption (“GFE”) in the UK’s controlled
foreign company legislation could, in some circumstances, constitute unlawful State Aid in respect of periods to 31 December 2018.
After applying the Commission’s Decision to Inchcape’s circumstances, HMRC has now confirmed that Inchcape’s use of the GFE
did not result in the receipt of State Aid.
Inchcape had previously recognised a provision of £5.4m for the estimated amount of the alleged State Aid. Given the confirmation
from HMRC, the provision has been released and the impact has been included in the results for the year ended 31 December
2020.
142
142
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Notes to the financial statements continued
Bank and other interest receivable
Net interest income on post-retirement plan assets and liabilities
6 Finance income
Sub-lease finance income
Other finance income
Total finance income
7 Finance costs
Interest payable on bank borrowings
Interest payable on Private Placement
Finance costs on lease liabilities
Fair value adjustment on Private Placement
Fair value gain on cross currency interest rate swaps
Stock holding interest (see note 21)
Other finance costs
Capitalised borrowing costs
Total finance costs
of 2.0% (2019 – 2.9%).
8 Tax
Current tax:
– UK corporation tax
– Overseas tax
Adjustments to prior year liabilities:
– UK
– Overseas
Current tax
Deferred tax (see note 17)
Total tax charge
The total tax charge is analysed as follows:
– Tax charge on profit before exceptional items
– Tax credit on exceptional items
Total tax charge
that are assessed as taxable/allowable.
Factors affecting the tax expense for the year
The Group capitalisation rate used for general borrowing costs in accordance with IAS 23 was a weighted average rate for the year
Details of the exceptional items for the year can be found in note 2. Not all of the exceptional items will be taxable/allowable for tax
purposes. Therefore, the tax credit on exceptional items represents the total of the current and deferred tax on only those elements
The effective tax rate for the year after exceptional items is -7.0% (2019 – 18.2%). The underlying effective tax rate before the impact
of exceptional items is 25.8% (2019 – 23.2%). The weighted average tax rate is 25.9% (2019 – 20.6%). The weighted average tax rate
comprises the average statutory rates across the Group, weighted in proportion to accounting profits and losses.
On 25 April 2019, the European Commission issued a Decision that the Group Financing Exemption (“GFE”) in the UK’s controlled
foreign company legislation could, in some circumstances, constitute unlawful State Aid in respect of periods to 31 December 2018.
After applying the Commission’s Decision to Inchcape’s circumstances, HMRC has now confirmed that Inchcape’s use of the GFE
did not result in the receipt of State Aid.
Inchcape had previously recognised a provision of £5.4m for the estimated amount of the alleged State Aid. Given the confirmation
from HMRC, the provision has been released and the impact has been included in the results for the year ended 31 December
2020.
142
Inchcape plc Annual Report and Accounts 2020
8 Tax continued
The table below explains the differences between the expected tax expense at the weighted average tax rate and the Group’s
total tax expense.
(Loss) / profit before tax
(Loss) / profit before tax multiplied by the weighted average tax rate of 25.9% (2019 – 20.6%)
– Permanent differences
– Non-taxable income
– Prior year items
– Derecognition / (recognition) of deferred tax assets
– Tax audits and settlements
– Taxes on undistributed earnings
– Other items (including tax rate differentials and changes)
– Goodwill impairment (see note 11)
– Acquisition and disposals of businesses
– Other asset write-offs and impairment (see notes 11, 12 and 13)
2020
£m
(128.2)
(33.2)
8.1
(2.4)
(5.1)
26.9
(4.8)
1.6
(0.6)
20.5
(1.8)
(0.2)
2019
£m
401.8
82.8
5.4
(2.6)
(5.5)
(0.4)
6.5
2.0
0.4
–
(20.5)
5.0
Total tax charge
9.0
73.1
Factors affecting the tax expense of future years
The Group’s future tax expense, and effective tax rate, could be affected by several factors including: the resolution of audits and
disputes, changes in tax laws or tax rates, the ability to utilise brought forward losses and business acquisitions and disposals. In
addition, a change in profit mix between low and high taxed jurisdictions will impact the Group’s future tax expense.
The utilisation of brought forward tax losses or the recognition of deferred tax assets associated with such losses may also give rise
to tax charges or credits. The recognition of deferred tax assets, particularly in respect of tax losses, is based upon an assessment of
whether it is probable that there will be sufficient and suitable taxable profits in the relevant legal entity or tax group against which
to utilise the assets in the future. Judgement is required when determining probable future taxable profits. In the event that actual
taxable profits are different to those forecast, the Group’s future tax expense and effective tax rate could be affected. Information
about the Group’s tax losses and deferred tax assets can be found in note 17.
The Group has published its approach to tax on www.inchcape.com covering its tax strategy and governance framework.
2020
£m
11.6
0.4
0.5
1.9
14.4
2020
£m
6.5
6.6
13.9
–
–
–
18.5
5.5
51.0
2020
£m
(0.7)
47.9
47.2
(4.8)
(2.7)
39.7
(30.7)
9.0
33.2
(24.2)
9.0
2019
£m
17.2
2.7
0.6
3.6
24.1
2019
£m
12.9
6.9
20.0
3.3
(3.4)
27.6
4.0
(0.1)
71.2
2019
£m
0.1
78.6
78.7
4.4
(2.6)
80.5
(7.4)
73.1
75.6
(2.5)
73.1
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 143
143
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
9 Earnings per share
(Loss) / profit for the year
Non-controlling interests
Basic (loss) / earnings
Exceptional items
Adjusted earnings
Basic (loss) / earnings per share
Diluted (loss) / 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
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
2020
£m
(137.2)
(2.9)
(140.1)
232.9
92.8
(35.6)p
(35.6)p
23.6p
23.4p
2019
£m
328.7
(5.8)
322.9
(78.0)
244.9
79.0p
78.4p
59.9p
59.5p
2020
number
2019
number
394,448,982 409,513,387
(535,394)
(763,509)
393,913,588 408,749,878
2,988,393
2,616,104
396,529,692 411,738,271
Basic (loss) / earnings per share is calculated by dividing the Basic (loss) / 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 buyback programme.
Diluted (loss) / earnings per share is calculated on the same basis as Basic (loss) / 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 providing an additional performance
measure of the Group. Basic 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 and repurchased as part of the share buyback programme.
Diluted Adjusted earnings per share is calculated on the same basis as the Basic Adjusted earnings per share with a further
adjustment to the weighted average number of fully paid ordinary shares to reflect the effect of all dilutive potential ordinary shares.
Dilutive potential ordinary shares comprise share options and other share-based awards.
Information presented for diluted and diluted adjusted earnings per ordinary share uses the weighted average number of shares as
adjusted for potentially dilutive ordinary shares as the denominator, unless it has the effect of increasing the profit or decreasing the
loss attributable to each share.
10 Dividends
The following dividends were paid by the Group:
Interim dividend for the six months ended 30 June 2020 of nil per share
(30 June 2019 of 8.9p per share)
Final dividend for the year ended 31 December 2019 of nil per share
(31 December 2018 of 17.9p per share)
2020
£m
–
–
–
2019
£m
36.3
74.2
110.5
The Board previously recommended a final ordinary dividend for the year ended 31 December 2019 of 17.9p per ordinary share.
The dividend was due to be paid on 19 June 2020. As announced on 7 April 2020, given the impact of COVID-19, the Group
decided to preserve cash and no longer recommend the payment of the previously announced final ordinary dividend. The
Directors did not propose an interim dividend for 2020.
A final proposed dividend for the year ended 31 December 2020 of 6.9p per share amounting to £27.2m is subject to approval by
shareholders at the Annual General Meeting and has not been included as a liability as at 31 December 2020.
The Group has sufficient distributable reserves to pay dividends to its ultimate shareholders. Distributable reserves are calculated on
an individual legal entity basis and the ultimate parent company, Inchcape plc, currently has adequate levels of realised profits
within its retained earnings to support dividend payments. At 31 December 2020, Inchcape plc’s company-only distributable
reserves were £472.6m. On an annual basis, the distributable reserve levels of the Group’s subsidiary undertakings are reviewed
and dividends paid up to Inchcape plc where it is appropriate to do so.
144
144
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Notes to the financial statements continued
9 Earnings per share
(Loss) / profit for the year
Non-controlling interests
Basic (loss) / earnings
Exceptional items
Adjusted earnings
Basic (loss) / earnings per share
Diluted (loss) / earnings per share
Basic Adjusted earnings per share
Diluted Adjusted earnings per share
2020
£m
(137.2)
(2.9)
(140.1)
232.9
92.8
(35.6)p
(35.6)p
23.6p
23.4p
2019
£m
328.7
(5.8)
322.9
(78.0)
244.9
79.0p
78.4p
59.9p
59.5p
2020
number
2019
number
(535,394)
(763,509)
393,913,588 408,749,878
2,616,104
2,988,393
396,529,692 411,738,271
Weighted average number of fully paid ordinary shares in issue during the year
394,448,982 409,513,387
Weighted average number of fully paid ordinary shares in issue during the year:
– Held by the Inchcape Employee Trust
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
Basic (loss) / earnings per share is calculated by dividing the Basic (loss) / 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 buyback programme.
Diluted (loss) / earnings per share is calculated on the same basis as Basic (loss) / 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 providing an additional performance
measure of the Group. Basic 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 and repurchased as part of the share buyback programme.
Diluted Adjusted earnings per share is calculated on the same basis as the Basic Adjusted earnings per share with a further
adjustment to the weighted average number of fully paid ordinary shares to reflect the effect of all dilutive potential ordinary shares.
Dilutive potential ordinary shares comprise share options and other share-based awards.
Information presented for diluted and diluted adjusted earnings per ordinary share uses the weighted average number of shares as
adjusted for potentially dilutive ordinary shares as the denominator, unless it has the effect of increasing the profit or decreasing the
loss attributable to each share.
10 Dividends
The following dividends were paid by the Group:
Interim dividend for the six months ended 30 June 2020 of nil per share
(30 June 2019 of 8.9p per share)
Final dividend for the year ended 31 December 2019 of nil per share
(31 December 2018 of 17.9p per share)
The Board previously recommended a final ordinary dividend for the year ended 31 December 2019 of 17.9p per ordinary share.
The dividend was due to be paid on 19 June 2020. As announced on 7 April 2020, given the impact of COVID-19, the Group
decided to preserve cash and no longer recommend the payment of the previously announced final ordinary dividend. The
Directors did not propose an interim dividend for 2020.
A final proposed dividend for the year ended 31 December 2020 of 6.9p per share amounting to £27.2m is subject to approval by
shareholders at the Annual General Meeting and has not been included as a liability as at 31 December 2020.
The Group has sufficient distributable reserves to pay dividends to its ultimate shareholders. Distributable reserves are calculated on
an individual legal entity basis and the ultimate parent company, Inchcape plc, currently has adequate levels of realised profits
within its retained earnings to support dividend payments. At 31 December 2020, Inchcape plc’s company-only distributable
reserves were £472.6m. On an annual basis, the distributable reserve levels of the Group’s subsidiary undertakings are reviewed
and dividends paid up to Inchcape plc where it is appropriate to do so.
144
Inchcape plc Annual Report and Accounts 2020
11 Intangible assets
Cost
At 1 January 2019
Businesses acquired (see note 29)
Businesses sold (see note 29)
Additions
Disposals
Retirement of fully amortised assets not in use
Reclassified to assets held for sale (see note 20)
Effect of foreign exchange rate changes
At 1 January 2020
Businesses acquired (see note 29)
Additions
Disposals
Reclassifications
Reclassified to assets held for sale (see note 20)
Effect of foreign exchange rate changes
At 31 December 2020
Accumulated amortisation and impairment
At 1 January 2019
Amortisation charge for the year
Impairment charge for the year
Business sold (see note 29)
Disposals
Retirement of fully amortised assets not in use
Effect of foreign exchange rate changes
At 1 January 2020
Amortisation charge for the year
Impairment charge for the year
Disposals
Reclassifications
Reclassified to assets held for sale (see note 20)
Effect of foreign exchange rate changes
At 31 December 2020
Net book value at 31 December 2020
Net book value at 31 December 2019
Goodwill
£m
Distribution
agreements
£m
Computer
software
£m
Other
intangible
assets
£m
634.2
10.1
(34.1)
–
–
–
(10.6)
(5.5)
594.1
1.2
–
–
–
–
(17.8)
577.5
(374.4)
–
–
–
–
–
(4.0)
(378.4)
–
(97.5)
–
–
–
17.4
(458.5)
119.0
215.7
249.8
33.2
–
–
–
–
–
(21.9)
261.1
14.2
–
–
–
–
2.1
277.4
–
–
–
–
–
–
–
–
–
(31.2)
–
–
–
0.4
(30.8)
246.6
261.1
214.1
0.3
(1.8)
25.2
(2.1)
–
–
(3.7)
232.0
(0.1)
20.5
(2.0)
1.9
(0.4)
(1.4)
250.5
(117.7)
(16.0)
(0.7)
1.4
1.0
–
1.1
(130.9)
(18.8)
(17.8)
1.4
(1.8)
0.3
1.7
(165.9)
84.6
101.1
0.1
–
–
–
–
(0.1)
–
–
–
–
–
–
–
–
–
–
(0.1)
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
Total
£m
1,098.2
43.6
(35.9)
25.2
(2.1)
(0.1)
(10.6)
(31.1)
1,087.2
15.3
20.5
(2.0)
1.9
(0.4)
(17.1)
1,105.4
(492.2)
(16.0)
(0.7)
1.4
1.0
0.1
(2.9)
(509.3)
(18.8)
(146.5)
1.4
(1.8)
0.3
19.5
(655.2)
450.2
577.9
2020
£m
–
–
–
2019
£m
36.3
74.2
110.5
The asset impairments of £146.5m which arose due to the impact of COVID-19 and the subsequent temporary closure of operations
across the Group’s many markets (2019 – £0.7m which arose following the disposal of businesses in Australia), are included within
exceptional items (see note 2). Further details on the impairment of computer software are disclosed in note 12.
At 31 December 2020, assets under construction total £26.9m (2019 – £28.0m).
Goodwill and distribution agreements
Goodwill acquired in a business combination has been allocated to the cash generating units (CGUs) or group of CGUs (hereafter
collectively referred to as ‘CGU groups’) that are expected to benefit from the synergies associated with that business combination.
Indefinite-life intangible assets, principally distribution agreements acquired in a business combination, are also allocated to the
CGUs or CGU groups that are expected to benefit from the cash flows associated with the relevant agreements.
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 145
145
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
11 Intangible assets continued
These CGU groups represent the lowest level within the Group at which the associated goodwill or indefinite-life intangible asset is
monitored for management purposes. The carrying amount of goodwill and indefinite-life intangible assets has been allocated to
CGU groups within the following reporting segments:
Reporting segment
CGU group
UK and Europe Retail
UK and Europe Distribution Baltics – BMW
Americas and Africa
Distribution
UK Retail
APAC Distribution
Americas – Daimler
Americas – Hino/Subaru
Americas – Suzuki
Kenya
Singapore
Australia Retail
Peugeot Citroën Australia
Goodwill
2020
£m
Distribution
agreements
2020
£m
Total
2020
£m
Goodwill
2019
£m
Distribution
agreements
2019
£m
–
6.2
4.4
47.2
37.6
1.1
22.5
–
–
119.0
–
28.9
27.7
137.8
52.2
–
–
–
–
246.6
–
35.1
32.1
185.0
89.8
1.1
22.5
–
–
365.6
80.2
5.8
3.8
45.7
44.8
1.2
22.8
9.6
1.8
215.7
–
27.4
13.8
134.6
85.3
–
–
–
–
261.1
Total
2019
£m
80.2
33.2
17.6
180.3
130.1
1.2
22.8
9.6
1.8
476.8
In accordance with the Group’s accounting policy, goodwill and other indefinite-life intangible assets are tested at least annually
for impairment and whenever events or circumstances indicate that the carrying amount may not be recoverable. Impairment tests
were performed for all CGU groups during the year ended 31 December 2020.
The recoverable amounts of all CGU groups were determined based on the higher of the fair value less costs to sell and value in
use calculations. The recoverable amount is determined firstly through value in use calculations. Where this is insufficient to cover
the carrying value of the relevant asset being tested, fair value less costs to sell is also determined.
If the carrying amount of a CGU or CGU group exceeds its recoverable amount, an impairment loss is recognised and allocated
between the assets of the unit to reduce the carrying amount. This allocation is initially applied to any site-based assets within a
CGU based on the results of impairment testing performed over individual site CGUs and then to any indefinite-life intangible assets.
If a further impairment charge still remains, then to the carrying amount of any goodwill allocated to the CGU or CGU group.
The value in use calculations mainly use cash flow projections based on five-year financial forecasts prepared by management.
The key assumptions for these forecasts are those relating to volumes, revenue, gross margins, overheads, the level of working
capital required to support trading and capital expenditure.
Forecast revenue is based on past experience and expectations for near-term growth in the relevant markets. Key assumptions
used to determine revenue are expectations of market size, represented by Total Industry Volume (TIV), Units in Operation (UIO)
and market share. Operating profits are forecast based on historical experience of gross and operating margins, adjusted for the
impact of changes to product mix and cost-saving initiatives that had been implemented at the reporting date. Cash flows are
forecast based on operating profit adjusted for the level of working capital required to support trading and capital expenditure.
The assumptions used in the value in use calculations are based on past experience, recent trading and forecasts of operational
performance in the relevant markets including the impact of COVID-19 and the UK trading arrangements with the European Union.
They also reflect expectations about continuing relationships with key brand partners and the impact climate change may have on
our operations. Whilst at this stage there is significant uncertainty regarding what the long-term impact of climate change initiatives
may be on the markets in which we operate, the forecasts reflect our best estimate.
For CGU groups in the Americas and Africa reporting segment, cash flows after the five-year period are extrapolated for a further
five years using declining growth rates which reduces the year five growth rate down to the long-term growth rate appropriate for
each CGU or CGU group, to better reflect the medium-term growth expectations for those markets. A terminal value calculation is
used to estimate the cash flows after year 10 using these long-term growth rates. For all other markets, a terminal value calculation
is used to estimate the cash flows after year five.
Where applicable, the Group has adopted a probability weighted scenario approach for the discounted cash flows used in the
impairment assessment. A range of expected outcomes was modelled including a base case, which reflected management’s best
estimate of future performance, an optimistic case scenario incorporating a better than expected recovery from COVID-19 and a
pessimistic scenario incorporating an extended closure period / lower recovery from COVID-19.
Cash flows are discounted back to present value using a discount rate specific to each CGU. The discount rates used are
calculated using the capital asset pricing model to derive a cost of equity which is then weighted with an estimated cost of debt
and lease liabilities based on an optimal market gearing structure. The Group uses several inputs to calculate a range for each
discount rate from which an absolute measure is determined for use in the value in use calculations. Key inputs include benchmark
risk free rates, inflation differentials, equity risk premium, country risk premium and a risk adjustment (beta) calculated by reference
to comparable companies with similar retail and distribution operations. Each CGU’s weighted average cost of capital is then
adjusted to reflect the impact of tax in order to calculate an equivalent pre-tax discount rate.
146
146
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Notes to the financial statements continued
Reporting segment
UK and Europe Retail
CGU group
UK Retail
UK and Europe Distribution Baltics – BMW
Americas and Africa
Americas – Daimler
Distribution
APAC Distribution
Americas – Hino/Subaru
Americas – Suzuki
Kenya
Singapore
Australia Retail
Peugeot Citroën Australia
Distribution
Goodwill
agreements
Distribution
Goodwill
agreements
2020
£m
–
6.2
4.4
47.2
37.6
1.1
22.5
–
–
2020
£m
–
28.9
27.7
137.8
52.2
–
–
–
–
Total
2020
£m
–
35.1
32.1
185.0
89.8
1.1
22.5
–
–
2019
£m
80.2
5.8
3.8
45.7
44.8
1.2
22.8
9.6
1.8
2019
£m
–
27.4
13.8
134.6
85.3
–
–
–
–
Total
2019
£m
80.2
33.2
17.6
180.3
130.1
1.2
22.8
9.6
1.8
119.0
246.6
365.6
215.7
261.1
476.8
In accordance with the Group’s accounting policy, goodwill and other indefinite-life intangible assets are tested at least annually
for impairment and whenever events or circumstances indicate that the carrying amount may not be recoverable. Impairment tests
were performed for all CGU groups during the year ended 31 December 2020.
The recoverable amounts of all CGU groups were determined based on the higher of the fair value less costs to sell and value in
use calculations. The recoverable amount is determined firstly through value in use calculations. Where this is insufficient to cover
the carrying value of the relevant asset being tested, fair value less costs to sell is also determined.
If the carrying amount of a CGU or CGU group exceeds its recoverable amount, an impairment loss is recognised and allocated
between the assets of the unit to reduce the carrying amount. This allocation is initially applied to any site-based assets within a
CGU based on the results of impairment testing performed over individual site CGUs and then to any indefinite-life intangible assets.
If a further impairment charge still remains, then to the carrying amount of any goodwill allocated to the CGU or CGU group.
The value in use calculations mainly use cash flow projections based on five-year financial forecasts prepared by management.
The key assumptions for these forecasts are those relating to volumes, revenue, gross margins, overheads, the level of working
capital required to support trading and capital expenditure.
Forecast revenue is based on past experience and expectations for near-term growth in the relevant markets. Key assumptions
used to determine revenue are expectations of market size, represented by Total Industry Volume (TIV), Units in Operation (UIO)
and market share. Operating profits are forecast based on historical experience of gross and operating margins, adjusted for the
impact of changes to product mix and cost-saving initiatives that had been implemented at the reporting date. Cash flows are
forecast based on operating profit adjusted for the level of working capital required to support trading and capital expenditure.
The assumptions used in the value in use calculations are based on past experience, recent trading and forecasts of operational
performance in the relevant markets including the impact of COVID-19 and the UK trading arrangements with the European Union.
They also reflect expectations about continuing relationships with key brand partners and the impact climate change may have on
our operations. Whilst at this stage there is significant uncertainty regarding what the long-term impact of climate change initiatives
may be on the markets in which we operate, the forecasts reflect our best estimate.
For CGU groups in the Americas and Africa reporting segment, cash flows after the five-year period are extrapolated for a further
five years using declining growth rates which reduces the year five growth rate down to the long-term growth rate appropriate for
each CGU or CGU group, to better reflect the medium-term growth expectations for those markets. A terminal value calculation is
used to estimate the cash flows after year 10 using these long-term growth rates. For all other markets, a terminal value calculation
is used to estimate the cash flows after year five.
Where applicable, the Group has adopted a probability weighted scenario approach for the discounted cash flows used in the
impairment assessment. A range of expected outcomes was modelled including a base case, which reflected management’s best
estimate of future performance, an optimistic case scenario incorporating a better than expected recovery from COVID-19 and a
pessimistic scenario incorporating an extended closure period / lower recovery from COVID-19.
Cash flows are discounted back to present value using a discount rate specific to each CGU. The discount rates used are
calculated using the capital asset pricing model to derive a cost of equity which is then weighted with an estimated cost of debt
and lease liabilities based on an optimal market gearing structure. The Group uses several inputs to calculate a range for each
discount rate from which an absolute measure is determined for use in the value in use calculations. Key inputs include benchmark
risk free rates, inflation differentials, equity risk premium, country risk premium and a risk adjustment (beta) calculated by reference
to comparable companies with similar retail and distribution operations. Each CGU’s weighted average cost of capital is then
adjusted to reflect the impact of tax in order to calculate an equivalent pre-tax discount rate.
146
Inchcape plc Annual Report and Accounts 2020
11 Intangible assets continued
These CGU groups represent the lowest level within the Group at which the associated goodwill or indefinite-life intangible asset is
monitored for management purposes. The carrying amount of goodwill and indefinite-life intangible assets has been allocated to
CGU groups within the following reporting segments:
11 Intangible assets continued
Key assumptions used
Pre-tax discount rates and long-term discount rates used in the value in use calculations for each of the Group’s CGUs are
shown below:
Goodwill:
2020
UK Retail
Baltics
Americas –
Daimler
Americas –
Hino/Subaru
Americas –
Suzuki
Kenya
Singapore
Pre-tax discount rate (%)
Long-term growth rate (%)
7.8
2.0
6.4
2.1
12.8
2.7
9.8
2.7
12.2
2.6
13.5
5.0
7.2
1.5
2019
Pre-tax discount rate (%)
Long-term growth rate (%)
UK Retail
Baltics
Americas –
Daimler1
Americas –
Hino/Subaru
Americas -
Suzuki
8.8
2.0
9.1
2.0
n/a
n/a
12.8
2.5
13.3
2.5
Kenya
Singapore
17.3
2.5
8.9
2.01
1. Due to the proximity of the acquisition of the Autolider business being immediately prior to the reporting date, no impairment test was carried out.
Australia
Retail
10.3
2.0
Australia
Retail
10.2
2.0
Peugeot
Citroën
Australia
10.3
2.0
Peugeot
Citroën
Australia
10.2
2.0
Indefinite-life intangible assets:
2020
Pre-tax discount rate (%)
Long-term growth rate (%)
2019
Pre-tax discount rate (%)
Long-term growth rate (%)
Baltics –
BMW
Americas –
Daimler
Americas –
Hino
Americas –
Subaru
Americas –
Suzuki
6.3
2.1
12.8
2.7
12.1
2.9
9.7
2.7
12.2
2.6
Baltics –
BMW
Americas –
Daimler1
Americas –
Hino
Americas –
Subaru
Americas –
Suzuki
9.1
2.0
n/a
n/a
12.9
2.5
12.7
2.5
13.3
2.5
1. Due to the proximity of the acquisition of the Autolider business being immediately prior to the reporting date, no impairment test was carried out.
Impairment
Central America
The Group acquired the Suzuki focused Distribution businesses in Costa Rica and Panama in 2018 with the aim of establishing a
presence in markets with structural growth potential. Since acquisition, prior to the impact of COVID-19, the TIV in both markets had
declined by an average of 19% based on externally available data. In the period to 30 June 20, the impact of COVID-19 contributed
to a further steep decline in TIV and the impairment assessment carried out indicated a low headroom. As a result, sensitivity
disclosures were included in the 2020 interim financial statement relating to the key assumptions included in the model.
The current ongoing situation with respect to the spread of COVID-19 in Central America has continued to cause uncertainty
regarding the impact of the pandemic on the region. As the situation deteriorated, both markets, particularly Costa Rica, were late
into lockdown and the two markets have some of the highest numbers of confirmed cases of COVID-19 in the region. Management
have updated the impairment assessment, with revised revenue forecasts based on historical market growth in the region and
average market share achieved for the Suzuki brand. Margin assumptions were aligned to those achieved by the business in
prior years.
The recoverable value of the CGU was determined based on value in use calculations, consistent with the approach used as at
both 31 December 2019 and 30 June 2020. Cash flows were discounted back to present value using a pre-tax discount rate of 12.2%
(2019 – 13.3%) and resulted in the impairment of the goodwill balance of £6.2m and an impairment of the distribution agreement
of £31.2m.
As at 31 December 2020, the recoverable amount of the CGU was £146.5m. The cash flows used within the impairment model are
based on assumptions which are sources of estimation uncertainty and small movements in these assumptions could lead to a
further impairment. Management have performed sensitivity analysis on the key assumptions in the impairment model using
reasonably possible changes in these key assumptions.
Revenue CAGR (%)
Pre-tax discount rate (%)
Average gross margin (%)
Long-term growth rate (%)
Increase /
(decrease) in
assumption
Effect on
value in use
calculation
£m
(1.0)
1.0
(0.5)
(0.5)
(30.7)
(16.7)
(11.4)
(7.1)
Inchcape plc Annual Report and Accounts 2020
147
Inchcape Annual Report and Accounts 2020 147
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
11 Intangible assets continued
In addition to the above, management has performed a sensitivity analysis in relation to the potential impact of climate change on
the value in use model, which we expect to manifest itself primarily in an accelerated adoption of electric vehicles in the market.
The scenario modelled reflected an increase to 30% electric vehicles penetration in the market over the period 2030 to 2040 and a
100bps change in market share while holding all other assumptions constant. Under this scenario, the impact on the value in use
model would be c£6m.
UK Retail
In 2019, the UK New car market declined by a further 2.4% (source: SMMT) broadly in line with previous forecasts and the UK Retail
business made meaningful progress in reshaping its Retail footprint through the selective sale of less productive UK Retail sites. In
light of the reduction in the UK Retail footprint, the Board revisited its short and medium-term forecast for the UK Retail CGU group
and updated the value in use calculations. The results of the impairment review indicated that the value in use calculation
exceeded the carrying value of the assets attributable to the UK Retail CGU group by c £70m as at 31 December 2019.
The UK Retail business was materially impacted by the COVID-19 pandemic with sites closed at the end of March and only
reopening again in June. The Group continued to reshape its Retail footprint through further disposals against a backdrop of an
uncertain outlook and forecasts for the business were updated for the goodwill impairment assessment carried out in the period to
30 June 2020. The cash flows used for impairment testing were based on the latest short-term forecasts for the business, covering
a two-year period, and took into account historical performance and knowledge of the current market, including the expected
volume and gross margin impact from COVID-19. Cash flows beyond the forecast initial period were extrapolated using externally
sourced volume projections. Margin assumptions were largely aligned to the prior year impairment exercise and our expectation
of future performance, again supported by historical performance and current market data available.
Cash flows were discounted back to present value using a pre-tax risk discount rate of 7.8% (2019 – 8.8%). The results of the
impairment review carried out indicated that the estimated recoverable value was now less than the carrying value of the assets
attributable to the UK Retail CGU group and an impairment charge of £80.2m was recognised, fully impairing the remaining
goodwill attributable to the UK Retail CGU group.
Australia Retail and Peugeot Citroën Australia
In the period to 30 June 2020, the impact of COVID-19 on the Australian economy has been severe and the country entered its first
recession in 29 years in the period. The Retail business, having undertaken significant restructuring through the disposal of selective
Retail operations that completed in February 2020, had expected to see an improvement in performance in 2020. The Peugeot
Citroën Distribution business was initially expected to deliver an improvement in performance in 2020 in light of recent changes to
operations within the country. However, the impact of COVID-19 materially affected both businesses, with a decline in performance
expected over the forecast period, due to a reduction in New car sales leading to a decline in the car parc which, in turn, impacts
higher margin aftersales.
The recoverable value of the two CGUs was determined based on value in use calculations, consistent with the approach used as
at 31 December 2019. Cash flows were discounted back to present value using a pre-tax discount rate of 10.3% (2019 – 10.2%) and
resulted in the full impairment of the goodwill balance of £11.1m attributable to these two CGUs.
Other CGUs
The Group’s value in use calculations are sensitive to a change in the key assumptions used. However, except for the cash
generating unit represented by the Daimler business in Americas, a reasonably possible change in a key assumption will not cause
a material impairment of goodwill or indefinite-life intangible assets in any of the CGU groups.
The recoverable amount of Americas – Daimler is estimated to exceed the carrying amount of the CGU at 31 December 2020 by
£12.0m. Due to the impact of COVID-19, the level of headroom for the cash generating unit represented by the Daimler business in
the Americas is considered low. As such, management have performed sensitivity analysis on the key assumptions in the models
using reasonably possible changes in key assumptions to determine what change is required that would cause the carrying
amount to exceed the recoverable amount calculated in the model.
The table below shows by how much key assumptions would have to change in order for the recoverable amount of this CGU to
equal its carrying amount, while holding all other assumptions constant:
Revenue CAGR (%)
Pre-tax discount rate (%)
Average gross margin (%)
Increase /
(decrease) in
assumption
(0.7)
1.8
(0.5)
The Directors and management have considered and assessed reasonably possible changes for other key assumptions and have
not identified any instances that could cause the carrying amount of the Americas – Daimler CGU to exceed its recoverable amount.
148
148
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Notes to the financial statements continued
11 Intangible assets continued
In addition to the above, management has performed a sensitivity analysis in relation to the potential impact of climate change on
the value-in-use model, which we expect to manifest itself primarily in an accelerated adoption of electric vehicles in the market.
The scenario modelled reflected an increase to 30% electric vehicles penetration in the market over the period 2030 to 2040 and a
100bps change in market share while holding all other assumptions constant. Under this scenario, the impact on the value-in-use
model would be c£6m.
UK Retail
In 2019, the UK New car market declined by a further 2.4% (source: SMMT) broadly in line with previous forecasts and the UK Retail
business made meaningful progress in reshaping its Retail footprint through the selective sale of less productive UK Retail sites. In
light of the reduction in the UK Retail footprint, the Board revisited its short and medium-term forecast for the UK Retail CGU group
and updated the value in use calculations. The results of the impairment review indicated that the value in use calculation
exceeded the carrying value of the assets attributable to the UK Retail CGU group by c £70m as at 31 December 2019.
The UK Retail business was materially impacted by the COVID-19 pandemic with sites closed at the end of March and only
reopening again in June. The Group continued to reshape its Retail footprint through further disposals against a backdrop of an
uncertain outlook and forecasts for the business were updated for the goodwill impairment assessment carried out in the period to
30 June 2020. The cash flows used for impairment testing were based on the latest short-term forecasts for the business, covering
a two-year period, and took into account historical performance and knowledge of the current market, including the expected
volume and gross margin impact from COVID-19. Cash flows beyond the forecast initial period were extrapolated using externally
sourced volume projections. Margin assumptions were largely aligned to the prior year impairment exercise and our expectation
of future performance, again supported by historical performance and current market data available.
Cash flows were discounted back to present value using a pre-tax risk discount rate of 7.8% (2019 – 8.8%). The results of the
impairment review carried out indicated that the estimated recoverable value was now less than the carrying value of the assets
attributable to the UK Retail CGU group and an impairment charge of £80.2m was recognised, fully impairing the remaining
goodwill attributable to the UK Retail CGU group.
Australia Retail and Peugeot Citroën Australia
In the period to 30 June 2020, the impact of COVID-19 on the Australian economy has been severe and the country entered its first
recession in 29 years in the period. The Retail business, having undertaken significant restructuring through the disposal of selective
Retail operations that completed in February 2020, had expected to see an improvement in performance in 2020. The Peugeot
Citroën Distribution business was initially expected to deliver an improvement in performance in 2020 in light of recent changes to
operations within the country. However, the impact of COVID-19 materially affected both businesses, with a decline in performance
expected over the forecast period, due to a reduction in New car sales leading to a decline in the car parc which, in turn, impacts
higher margin aftersales.
The recoverable value of the two CGUs was determined based on value-in-use calculations, consistent with the approach used as
at 31 December 2019. Cash flows were discounted back to present value using a pre-tax discount rate of 10.3% (2019 – 10.2%) and
resulted in the full impairment of the goodwill balance of £11.1m attributable to these two CGUs.
Other CGUs
The Group’s value in use calculations are sensitive to a change in the key assumptions used. However, except for the cash
generating unit represented by the Daimler business in Americas, a reasonably possible change in a key assumption will not cause
a material impairment of goodwill or indefinite-life intangible assets in any of the CGU groups.
The recoverable amount of Americas – Daimler is estimated to exceed the carrying amount of the CGU at 31 December 2020 by
£12.0m. Due to the impact of COVID-19, the level of headroom for the cash generating unit represented by the Daimler business in
the Americas is considered low. As such, management have performed sensitivity analysis on the key assumptions in the models
using reasonably possible changes in key assumptions to determine what change is required that would cause the carrying
amount to exceed the recoverable amount calculated in the model.
The table below shows by how much key assumptions would have to change in order for the recoverable amount of this CGU to
equal its carrying amount, while holding all other assumptions constant:
Revenue CAGR (%)
Pre-tax discount rate (%)
Average gross margin (%)
The Directors and management have considered and assessed reasonably possible changes for other key assumptions and have
not identified any instances that could cause the carrying amount of the Americas – Daimler CGU to exceed its recoverable amount.
Increase /
(decrease) in
assumption
(0.7)
1.8
(0.5)
148
Inchcape plc Annual Report and Accounts 2020
12 Property, plant and equipment
Cost
At 1 January 2019
Businesses acquired (see note 29)
Businesses sold (see note 29)
Additions
Disposals
Transferred to/from inventory
Other1
Reclassified to assets held for sale (see note 20)
Effect of foreign exchange rate changes
At 1 January 2020
Businesses acquired (see note 29)
Businesses sold (see note 29)
Additions
Disposals
Reclassifications
Transferred to/from inventory
Retirement of fully depreciated assets
Reclassified to assets held for sale (see note 20)
Effect of foreign exchange rate changes
At 31 December 2020
Accumulated depreciation and impairment
At 1 January 2019
Businesses sold (see note 29)
Depreciation charge for the year
Impairment charge for the year
Disposals
Transferred to/from inventory
Other1
Reclassified to assets held for sale (see note 20)
Effect of foreign exchange rate changes
At 1 January 2020
Businesses sold (see note 29)
Depreciation charge for the year
Impairment charge for the year
Disposals
Reclassifications
Transferred to/from inventory
Retirement of fully depreciated assets
Reclassified to assets held for sale (see note 20)
Effect of foreign exchange rate changes
At 31 December 2020
Net book value at 31 December 2020
Net book value at 31 December 2019
Plant,
machinery
and
equipment
£m
Land and
buildings
£m
887.1
7.5
(72.5)
21.9
(14.0)
–
–
(53.5)
(13.3)
763.2
0.3
(29.8)
13.9
(5.5)
(0.4)
–
–
(0.6)
(19.7)
721.4
(202.3)
15.2
(18.1)
(4.8)
7.0
–
–
23.9
4.7
(174.4)
0.6
(20.1)
(33.1)
2.4
–
–
–
–
3.1
(221.5)
499.9
588.8
258.1
2.5
(10.4)
21.4
(12.4)
0.1
18.7
(5.0)
(7.9)
265.1
(0.2)
(5.3)
13.6
(18.8)
(1.4)
4.4
(1.0)
(4.2)
(4.7)
247.5
(167.8)
6.7
(24.5)
–
7.8
0.3
(18.7)
4.4
4.7
(187.1)
1.8
(15.8)
(9.6)
14.3
1.7
(2.4)
1.0
3.5
2.8
(189.8)
57.7
78.0
Subtotal
£m
1,145.2
10.0
(82.9)
43.3
(26.4)
0.1
18.7
(58.5)
(21.2)
1,028.3
0.1
(35.1)
27.5
(24.3)
(1.8)
4.4
(1.0)
(4.8)
(24.4)
968.9
(370.1)
21.9
(42.6)
(4.8)
14.8
0.3
(18.7)
28.3
9.4
(361.5)
2.4
(35.9)
(42.7)
16.7
1.7
(2.4)
1.0
3.5
5.9
(411.3)
557.6
666.8
Interest
in leased
vehicles
£m
63.8
0.2
(8.7)
9.1
(0.1)
(23.0)
–
–
(1.9)
39.4
(0.1)
–
3.1
–
(0.1)
(22.7)
–
–
(0.2)
19.4
(17.2)
3.7
(6.9)
–
–
8.8
–
–
0.5
(11.1)
–
(4.1)
–
–
0.1
7.9
–
–
–
(7.2)
12.2
28.3
Total
£m
1,209.0
10.2
(91.6)
52.4
(26.5)
(22.9)
18.7
(58.5)
(23.1)
1,067.7
–
(35.1)
30.6
(24.3)
(1.9)
(18.3)
(1.0)
(4.8)
(24.6)
988.3
(387.3)
25.6
(49.5)
(4.8)
14.8
9.1
(18.7)
28.3
9.9
(372.6)
2.4
(40.0)
(42.7)
16.7
1.8
5.5
1.0
3.5
5.9
(418.5)
569.8
695.1
1. This represents a correction of a historic adjustment to cost and accumulated depreciation of acquired plant, machinery and equipment. It has no net impact on net book
value at any balance sheet date presented.
The asset impairments of £42.7m, which arose due to the impact of COVID-19 and the subsequent temporary closure of operations
across the Group’s many markets (2019 – £4.8m in the UK and Australia as a result of the Retail disposals in those markets), are
included within exceptional items (see note 2).
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.
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 149
149
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
12 Property, plant and equipment continued
The book value of land and buildings is analysed between:
Freehold
Leasehold with over 50 years unexpired
Short leasehold
2020
£m
376.0
18.9
105.0
499.9
2019
£m
423.5
45.1
120.2
588.8
Land and buildings include properties with a net book value of £6.1m (2019 – £9.7m) that are let to third parties on a short-term basis.
Borrowing costs of £nil were capitalised during the year (2019 – £0.1m).
Impairment of computer software, property, plant and equipment and right-of-use assets
Computer software, property, plant and equipment and right-of-use assets are reviewed for impairment if events or circumstances
indicate that the carrying value may not be recoverable. When an impairment review is carried out, the recoverable value is
determined based on the higher of value in use calculations, which require estimates to be made of future cash flows, or fair value
less costs of disposal. In light of the COVID-19 pandemic, impairment triggers were identified in a number of markets and impairment
reviews were performed where appropriate. The approach to test computer software, property, plant and equipment and right-of-use
assets for impairment was consistent with the approach used to test goodwill and other indefinite-life intangible assets.
The value in use calculations use cash flow projections based on five-year financial forecasts prepared by management. The key
assumptions for these forecasts are those relating to volumes, revenue, gross margins, overheads, the level of working capital
required to support trading and capital expenditure. Where the value in use calculations did not support the carrying value of an
asset, an estimate for fair value less costs of disposal was determined by obtaining property valuations for the relevant locations.
The results of the testing indicated that impairment charges totalling £93.5m were required against site and other assets, principally
in relation to Retail businesses in the UK, Australia and Russia.
Computer software
Property, plant and equipment
Right-of-use assets
At 31 December
2020
£m
17.8
42.7
33.0
93.5
2019
£m
0.7
4.8
8.7
14.2
The cash flows used within the site-based asset impairment models for the UK, Australia and Russia CGUs are based on assumptions
where small movements in the assumptions could lead to further impairments. As such, management have performed sensitivity
analysis on the key assumptions in the models using reasonably possible changes in key assumptions to determine what change
is required that would cause the carrying amount to exceed the recoverable amount calculated in the model. In other CGUs,
management have considered and assessed reasonably possible changes for other key assumptions and have not identified any
instances that could cause a significant increase in the impairment charge.
Pre-tax discount rate (%)
Long-term growth rate (%)
2020
£m
Increase /
(decrease) in
assumption
UK
Australia
Russia
0.5
(0.5)
5.8
4.2
0.1
0.5
1.7
0.6
The impairment charge in relation to computer software includes a charge in respect of an omni-channel digital solution. The
Group initiated a programme to develop an omni-channel digital solution in late 2018, with the aim of implementing the solution
in various markets and franchises across the globe. In response to the COVID-19 pandemic, we have revisited the solution, its
associated technology and the way in which the solution will be delivered. As a result of this review, an alternative solution has
been identified that can be delivered quicker and to more markets to meet the changing needs of consumers. However, certain
developments will no longer be used or will need to be re-worked, resulting in an impairment charge of £8.6m. The remaining
carrying value recognised within computer software at 31 December 2020 is £10.1m.
150
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Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Notes to the financial statements continued
12 Property, plant and equipment continued
The book value of land and buildings is analysed between:
Freehold
Short leasehold
Leasehold with over 50 years unexpired
2020
£m
376.0
18.9
105.0
499.9
2019
£m
423.5
45.1
120.2
588.8
2020
£m
17.8
42.7
33.0
93.5
2019
£m
0.7
4.8
8.7
14.2
2020
£m
Land and buildings include properties with a net book value of £6.1m (2019 – £9.7m) that are let to third parties on a short-term basis.
Borrowing costs of £nil were capitalised during the year (2019 – £0.1m).
Impairment of computer software, property, plant and equipment and right-of-use assets
Computer software, property, plant and equipment and right-of-use assets are reviewed for impairment if events or circumstances
indicate that the carrying value may not be recoverable. When an impairment review is carried out, the recoverable value is
determined based on the higher of value in use calculations, which require estimates to be made of future cash flows, or fair value
less costs of disposal. In light of the COVID-19 pandemic, impairment triggers were identified in a number of markets and impairment
reviews were performed where appropriate. The approach to test computer software, property, plant and equipment and right-of-use
assets for impairment was consistent with the approach used to test goodwill and other indefinite-life intangible assets.
The value in use calculations use cash flow projections based on five-year financial forecasts prepared by management. The key
assumptions for these forecasts are those relating to volumes, revenue, gross margins, overheads, the level of working capital
required to support trading and capital expenditure. Where the value in use calculations did not support the carrying value of an
asset, an estimate for fair value less costs of disposal was determined by obtaining property valuations for the relevant locations.
The results of the testing indicated that impairment charges totalling £93.5m were required against site and other assets, principally
in relation to Retail businesses in the UK, Australia and Russia.
Computer software
Property, plant and equipment
Right-of-use assets
At 31 December
The cash flows used within the site-based asset impairment models for the UK, Australia and Russia CGUs are based on assumptions
where small movements in the assumptions could lead to further impairments. As such, management have performed sensitivity
analysis on the key assumptions in the models using reasonably possible changes in key assumptions to determine what change
is required that would cause the carrying amount to exceed the recoverable amount calculated in the model. In other CGUs,
management have considered and assessed reasonably possible changes for other key assumptions and have not identified any
instances that could cause a significant increase in the impairment charge.
Pre-tax discount rate (%)
Long-term growth rate (%)
The impairment charge in relation to computer software includes a charge in respect of an omni-channel digital solution. The
Group initiated a programme to develop an omni-channel digital solution in late 2018, with the aim of implementing the solution
in various markets and franchises across the globe. In response to the COVID-19 pandemic, we have revisited the solution, its
associated technology and the way in which the solution will be delivered. As a result of this review, an alternative solution has
been identified that can be delivered quicker and to more markets to meet the changing needs of consumers. However, certain
developments will no longer be used or will need to be re-worked, resulting in an impairment charge of £8.6m. The remaining
carrying value recognised within computer software at 31 December 2020 is £10.1m.
Increase /
(decrease) in
assumption
UK
Australia
Russia
0.5
(0.5)
5.8
4.2
0.1
0.5
1.7
0.6
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Inchcape plc Annual Report and Accounts 2020
13 Right-of-use assets and lease liabilities
a. Amounts recognised in the balance sheet
Cost
At 1 January 2019
Businesses acquired (see note 29)
Businesses sold (see note 29)
Additions
Derecognition
Transferred to assets held for sale
Remeasurement
Effect of foreign exchange rate changes
At 1 January 2020
Businesses acquired (see note 29)
Additions
Lease payments at or before commencement date
Derecognition
Transferred to assets held for sale (see note 20)
Remeasurement
Effect of foreign exchange rate changes
At 31 December 2020
Accumulated depreciation and impairment
At 1 January 2019
Businesses sold (see note 29)
Depreciation charge for the year
Derecognition
Impairment charge for the year
Transferred to assets held for sale
Effect of foreign exchange rate changes
At 1 January 2020
Depreciation charge for the year
Derecognition
Impairment charge for the year
Transferred to assets held for sale (see note 20)
Effect of foreign exchange rate changes
At 31 December 2020
Net book value at 31 December 2020
Net book value at 31 December 2019
Land and
buildings
£m
Other
£m
Total
£m
678.9
11.7
(48.3)
25.8
(48.1)
(42.6)
8.8
(20.2)
566.0
1.1
21.8
0.3
(20.1)
(4.1)
15.2
2.1
582.3
(265.8)
12.0
(64.9)
44.4
(8.7)
19.4
9.0
(254.6)
(53.1)
15.3
(33.3)
2.1
(2.9)
(326.5)
255.8
311.4
4.6
–
–
0.5
–
–
0.6
(0.2)
5.5
–
0.8
–
(2.0)
–
–
–
4.3
(2.5)
–
(1.4)
0.1
–
–
0.2
(3.6)
(1.1)
2.0
–
–
(0.1)
(2.8)
1.5
1.9
683.5
11.7
(48.3)
26.3
(48.1)
(42.6)
9.4
(20.4)
571.5
1.1
22.6
0.3
(22.1)
(4.1)
15.2
2.1
586.6
(268.3)
12.0
(66.3)
44.5
(8.7)
19.4
9.2
(258.2)
(54.2)
17.3
(33.3)
2.1
(3.0)
(329.3)
257.3
313.3
Asset impairments total £33.3m, of which £33.0m arose due to the impact of COVID-19 and the subsequent temporary closure of
operations across the Group’s many markets (2019 – £8.7m in Australia as a result of the Retail disposals in the market) and are
included within exceptional items (see note 2). Further details on the impairment of right-of-use assets are disclosed in note 12.
Remeasurements of £15.2m (2019 – £9.4m) were made to leases during the year, primarily in the UK, due to either a change in the
lease term or a change in an index or rate applicable to the underlying lease.
Lease liabilities
Current
Non-current
At 31 December
2020
£m
2019
£m
58.5
274.3
332.8
56.8
296.0
352.8
Inchcape plc Annual Report and Accounts 2020
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151
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
13 Right-of-use assets and lease liabilities continued
b. The Group’s leasing activities and how these are accounted for
The Group leases various retail and other locations, primarily in the UK, Australia, Hong Kong, South America and Russia. Rental
contracts are typically made for fixed periods of 2 to 25 years but may have extension options as described below. Lease terms are
negotiated on an individual basis and contain a wide range of different terms and conditions.
Lease liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of
the following lease payments:
– fixed payments (including in-substance fixed payments), less any lease incentives receivable;
– variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the
commencement date;
– amounts expected to be payable by the Group under residual value guarantees;
– the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
– payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is
generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee
would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic
environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
– uses a build-up approach that starts with a risk-free interest rate by market and currency;
– applies a credit risk, based on yields of comparable entities, to the determined risk-free interest rate by market; and
– where applicable, makes adjustments specific to the lease, e.g. term, country, currency and security.
Lease liabilities are re-measured when there is a change in future lease payments arising from a change in an index or rate, if there
is a change in the estimate of the amount expected to be payable under a residual value guarantee, or if there is a change in the
assessment of whether a purchase, lease-term extension or termination option will be exercised. When lease liabilities are re-
measured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or recorded in profit or
loss if the carrying amount of the right-of-use asset has been reduced to zero.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease
period to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are recognised at the commencement date of the lease. Right-of-use assets comprising mainly land and
buildings are measured at cost less accumulated depreciation and impairment losses. The costs include the amount of the initial
measurement of the lease liability, any lease payments made at or before the commencement date less lease incentives received,
any direct costs and an estimate of dismantling costs. The carrying amount is further adjusted for any remeasurement of the lease
liability. Depreciation is expensed to the income statement on a straight-line basis over the lease term. The lease term includes the
noncancellable period of lease together with any extension or termination options that are reasonably certain to be exercised.
Payments associated with short-term leases and all leases of low-value assets are recognised on a straight-line basis as an expense
in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise largely small items of
office equipment.
152
152
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
contracts are typically made for fixed periods of 2 to 25 years but may have extension options as described below. Lease terms are
Amounts recognised in the statement of financial position in respect of joint ventures and associates are as follows:
14 Investments in joint ventures and associates
Details of the interests held by the Group in joint ventures and associates can be found in note 14 to the Inchcape Plc Company
financial statements on pages 188 to 196.
At 1 January
Share of profit after tax of joint ventures and associates
Disposals
Effect of foreign exchange rate changes
At 31 December
Net assets of joint ventures and associates
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Results of joint ventures and associates
Revenue
Other income
Profit before tax
Tax
(Loss) / profit after tax of joint ventures and associates
Summarised financial information of joint ventures and associates
Opening net assets at 1 January
(Loss) / profit for the year
Disposals
Other comprehensive income / (loss) for the year
Closing net assets at 31 December
2020
£m
4.3
–
(2.0)
0.1
2.4
2020
£m
5.3
5.3
(0.4)
(0.4)
4.9
2020
£m
–
–
–
(0.1)
(0.1)
2020
£m
8.7
(0.1)
(4.0)
0.3
4.9
2019
£m
4.3
0.3
(0.1)
(0.2)
4.3
2019
£m
9.1
9.1
(0.4)
(0.4)
8.7
2019
£m
–
0.6
0.6
–
0.6
2019
£m
8.6
0.6
(0.2)
(0.3)
8.7
Carrying value of interest in joint ventures and associates
2.4
4.3
During the year, the Group received £2.0m following the liquidation of Inchcape Financial Services Limited.
As at 31 December 2020, no guarantees were provided in respect of joint ventures and associates’ borrowings (2019 – £nil).
Notes to the financial statements continued
13 Right-of-use assets and lease liabilities continued
b. The Group’s leasing activities and how these are accounted for
The Group leases various retail and other locations, primarily in the UK, Australia, Hong Kong, South America and Russia. Rental
negotiated on an individual basis and contain a wide range of different terms and conditions.
Lease liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of
the following lease payments:
commencement date;
– fixed payments (including in-substance fixed payments), less any lease incentives receivable;
– variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the
– amounts expected to be payable by the Group under residual value guarantees;
– the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
– payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is
generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee
would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic
environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
– uses a build-up approach that starts with a risk-free interest rate by market and currency;
– applies a credit risk, based on yields of comparable entities, to the determined risk-free interest rate by market; and
– where applicable, makes adjustments specific to the lease, e.g. term, country, currency and security.
Lease liabilities are re-measured when there is a change in future lease payments arising from a change in an index or rate, if there
is a change in the estimate of the amount expected to be payable under a residual value guarantee, or if there is a change in the
assessment of whether a purchase, lease-term extension or termination option will be exercised. When lease liabilities are re-
measured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or recorded in profit or
loss if the carrying amount of the right-of-use asset has been reduced to zero.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease
period to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are recognised at the commencement date of the lease. Right-of-use assets comprising mainly land and
buildings are measured at cost less accumulated depreciation and impairment losses. The costs include the amount of the initial
measurement of the lease liability, any lease payments made at or before the commencement date less lease incentives received,
any direct costs and an estimate of dismantling costs. The carrying amount is further adjusted for any remeasurement of the lease
liability. Depreciation is expensed to the income statement on a straight-line basis over the lease term. The lease term includes the
noncancellable period of lease together with any extension or termination options that are reasonably certain to be exercised.
Payments associated with short-term leases and all leases of low-value assets are recognised on a straight-line basis as an expense
in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise largely small items of
office equipment.
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Inchcape plc Annual Report and Accounts 2020
153
Inchcape Annual Report and Accounts 2020 153
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
15 Financial assets at fair value through other comprehensive income
At 1 January
Losses recognised in other comprehensive income
Effect of foreign exchange rate changes
At 31 December
Analysed as:
Current
Non-current
Assets held are analysed as follows:
Equity securities
Other
2020
£m
7.1
(2.7)
(0.6)
3.8
2020
£m
0.2
3.6
3.8
2020
£m
3.6
0.2
3.8
2019
£m
7.4
–
(0.3)
7.1
2019
£m
0.2
6.9
7.1
2019
£m
6.9
0.2
7.1
‘Equity securities’ includes a 15% equity interest in Hino Motors Manufacturing Company SAS.
‘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.
16 Trade and other receivables
Trade receivables
Less: allowance for expected credit losses
Net trade receivables
Prepayments
Accrued income
Other receivables
Movements in the allowance for expected credit losses 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:
2020
£m
208.0
(10.4)
197.6
54.4
41.1
76.5
369.6
Current
2019
£m
329.0
(8.7)
320.3
55.8
62.1
74.1
512.3
2020
£m
10.8
–
10.8
8.0
1.2
29.2
49.2
2020
£m
(8.7)
(2.8)
0.6
0.4
0.1
(10.4)
Non-current
2019
£m
12.6
–
12.6
7.1
–
19.0
38.7
2019
£m
(11.4)
(2.0)
1.1
3.6
–
(8.7)
2020
2019
Neither past
due nor
impaired
£m
Past due but not impaired
0 – 30 days
£m
30 – 90 days
£m
> 90 days
£m
Impaired
£m
118.3
228.2
43.2
53.9
20.0
24.7
26.9
26.1
10.4
8.7
Total
£m
218.8
341.6
Trade receivables are non-interest bearing and are generally on credit terms of 30 to 60 days. Trade receivables are only written off
where there is no reasonable expectation of recovery.
The concentration of credit risk with respect to trade receivables is very limited due to the Group’s broad customer base across a
number of geographic regions and the default loss percentage incurred by the Group has customarily been low even if there have
been significant changes in economic conditions experienced in markets in which the Group operates. As a consequence, the risk
associated with trade receivable balances past due but not impaired is not expected to be significant and as such does not
contribute to a significant allowance for expected credit losses of receivables being recognised.
154
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Inchcape plc Annual Report and Accounts 2020
Notes to the financial statements continued
15 Financial assets at fair value through other comprehensive income
At 1 January
Losses recognised in other comprehensive income
Effect of foreign exchange rate changes
At 31 December
Analysed as:
Current
Non-current
Equity securities
Other
Assets held are analysed as follows:
reference to traded market values.
16 Trade and other receivables
Trade receivables
Less: allowance for expected credit losses
Net trade receivables
Prepayments
Accrued income
Other receivables
‘Equity securities’ includes a 15% equity interest in Hino Motors Manufacturing Company SAS.
‘Other’ includes debentures that are not subject to interest rates and do not have fixed maturity dates. They are valued by
2020
£m
7.1
(2.7)
(0.6)
3.8
2020
£m
0.2
3.6
3.8
2020
£m
3.6
0.2
3.8
2020
£m
10.8
–
10.8
8.0
1.2
29.2
49.2
2020
£m
(8.7)
(2.8)
0.6
0.4
0.1
2019
£m
7.4
–
(0.3)
7.1
2019
£m
0.2
6.9
7.1
2019
£m
6.9
0.2
7.1
2019
£m
12.6
–
12.6
7.1
–
19.0
38.7
2019
£m
(11.4)
(2.0)
1.1
3.6
–
Non-current
(10.4)
(8.7)
2020
£m
208.0
(10.4)
197.6
54.4
41.1
76.5
Current
2019
£m
329.0
(8.7)
320.3
55.8
62.1
74.1
369.6
512.3
Movements in the allowance for expected credit losses 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:
2020
2019
Neither past
due nor
impaired
£m
118.3
228.2
Total
£m
218.8
341.6
Past due but not impaired
0 – 30 days
30 – 90 days
> 90 days
Impaired
£m
43.2
53.9
£m
20.0
24.7
£m
26.9
26.1
£m
10.4
8.7
Trade receivables are non-interest bearing and are generally on credit terms of 30 to 60 days. Trade receivables are only written off
where there is no reasonable expectation of recovery.
The concentration of credit risk with respect to trade receivables is very limited due to the Group’s broad customer base across a
number of geographic regions and the default loss percentage incurred by the Group has customarily been low even if there have
been significant changes in economic conditions experienced in markets in which the Group operates. As a consequence, the risk
associated with trade receivable balances past due but not impaired is not expected to be significant and as such does not
contribute to a significant allowance for expected credit losses of receivables being recognised.
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Inchcape plc Annual Report and Accounts 2020
16 Trade and other receivables continued
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.
The allowance for expected credit losses for trade receivables and accrued income is based on an expected credit loss model that
calculates the expected loss applicable to the receivable balance over its lifetime. For the Group, the simplified approach under
IFRS 9 is applied to the majority, if not all, of trade receivables and accrued income. Under this approach, the provision required
against receivables is calculated by considering the cash shortfall that would be incurred in various default scenarios for prescribed
future periods. Default rates are calculated initially by Inchcape’s markets considering historical loss experience and applied to
trade receivables within a provision matrix. The matrix approach allows application of different default rates to different groups of
customers with similar characteristics. These groups will be determined by a number of factors including: the nature of the
customer, the payment method selected and where relevant, the sector in which they operate. The characteristics used to
determine the groupings of receivables are the factors that have the greatest impact on the likelihood of default. The rate of default
increases once the balance is 30 days past due and subsequently in 30-day increments.
17 Deferred tax
Net deferred tax (liability) / asset
At 1 January 2019
Credited / (charged) to the
consolidated income statement
(Charged) / credited to equity and
other comprehensive income
Businesses acquired / disposed
Effect of foreign exchange rate
changes
At 31 December 2019
Credited / (charged) to the
consolidated income statement
(Charged) / credited to equity and
other comprehensive income
Businesses acquired / disposed
Effect of foreign exchange rate
changes
At 31 December 2020
Analysed as:
Deferred tax assets
Deferred tax liabilities
Pension and
other post-
retirement
benefits
£m
Cash flow
hedges
£m
Share-based
payments
£m
Tax
losses
£m
Accelerated
tax
depreciation
£m
Provisions and
other timing
differences
£m
Distribution
agreements
£m
IFRS 16
£m
Total
£m
(14.4)
(3.4)
2.0
11.1
(4.8)
12.7
(73.1) 10.9 (59.0)
–
10.1
(0.1)
0.2
(4.2)
0.1
7.0
–
(0.2)
3.5
(0.4)
8.0
0.6
(2.3)
–
1.4
7.4
0.7
–
–
2.3
–
(0.2)
(0.6)
18.3
–
(0.5)
(0.3)
(5.0)
–
(0.5)
(1.0)
8.9
–
(6.4)
–
(1.1)
17.8
(8.8)
6.5
4.2
(0.4)
(73.0) 10.8 (38.4)
0.1
–
(1.5) (2.8)
11.7
6.3
11.0
5.9
30.7
(2.8)
–
–
(6.9)
(1.7)
–
0.1
1.9
0.4
–
0.8
–
–
(0.7)
1.2 15.6
–
(0.3)
0.9
7.3
0.3
(0.2)
0.8
16.1
–
–
–
–
(3.0)
(0.5)
(1.0)
0.7
0.6
(63.0) 17.3 (10.5)
2020
£m
68.6
(79.1)
(10.5)
2019
£m
58.3
(96.7)
(38.4)
Measured at relevant local statutory rates, the Group has an unrecognised deferred tax asset of £35m (2019 – £22m) relating to tax
relief on trading losses. The unrecognised asset represents £167m (2019 – £108m) of losses which exist within legal entities where
forecast taxable profits are not probable in the foreseeable future.
The Group has unrecognised deferred tax assets of £30m (2019 – £25m) relating to capital losses. The asset represents £154m
(2019 – £147m) of losses. The primary 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 £1.6m (2019 –
£2.0m) is accrued based on current year after tax earnings.
The net deferred tax asset on provisions and other timing differences is principally made up of a deferred tax liability on non-
qualifying property £9.9m (2019 – £11.4m) offset by deferred tax assets on trade related accounting provisions in the Group’s
operating companies of £26.0m (2019 – £20.3m).
The deferred tax liability on distribution agreements of £63.0m (2019 – £73.0m) has been recorded as a result of the business
acquisitions since 2016.
The deferred tax asset on tax trading losses of £15.6m (2019 – £18.3m) relates to territories and entities where future taxable profits
are considered probable.
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 155
155
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
18 Inventories
Raw materials and work in progress
Finished goods and merchandise
2020
£m
45.7
1,170.5
1,216.2
2019
£m
33.2
1,533.7
1,566.9
Vehicles held on consignment which are in substance assets of the Group amount to £159.2m (2019 – £167.2m). 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 a period of up to six months from delivery or the date
of sale.
An amount of £54.4m (2019 – £44.8m) 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 £5,656.1m (2019 – £7,504.9m). The write-down of inventory to net realisable value
recognised as an expense during the year was £21.2m (2019 – £22.2m). All of these items have been included within ‘cost of sales’
in the consolidated income statement.
19 Cash and cash equivalents
Cash at bank and cash equivalents
Short-term deposits
2020
£m
378.5
102.7
481.2
2019
£m
321.5
101.5
423.0
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 2020, the weighted average
floating rate was 0.28% (2019 – 0.42%).
£81.2m (2019 – £88.0m) of cash and cash equivalents is held in Ethiopia where prior approval is required to transfer funds abroad,
and currency may not be available locally to effect such transfers.
At 31 December 2020, short-term deposits have a weighted average period to maturity of 15 days (2019 – 25 days).
20 Assets and liabilities held for sale and disposal group
Assets held for sale
Assets directly associated with the disposal group
Assets classified as held for sale and disposal group
Liabilities directly associated with the disposal group
1. Classification has been reassessed to conform to the current presentation.
The assets and liabilities in the disposal group comprise the following:
Goodwill
Property, plant and equipment
Right-of-use assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Assets directly associated with the disposal group
Trade and other payables
Lease liabilities
Other liabilities
Liabilities directly associated with the disposal group
2020
£m
7.5
23.7
31.2
(7.7)
2019
£m
(Restated)1
10.4
139.0
149.4
(106.1)
2020
£m
–
5.4
2.2
1.2
0.9
13.7
0.3
23.7
(5.1)
(1.3)
(1.3)
(7.7)
2019
£m
7.6
24.9
22.9
–
–
83.6
–
139.0
(76.4)
(29.7)
–
(106.1)
Assets held for sale relate to surplus properties within the UK, Russia and Colombia which are actively marketed with a view to sale.
The disposal groups relate to the assets and liabilities attributable to Retail centres in the UK and Belgium. These sites are expected
to be disposed of during the next 12 months.
156
156
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Inchcape plc Annual Report and Accounts 2020
21 Trade and other payables
Trade payables
Payments received on account
Vehicle funding agreements
Other taxation and social security payable
Accruals
Deferred income
Other payables
2020
£m
147.8
82.5
1,013.8
32.0
211.0
78.3
44.9
1,610.3
Current
2019
£m
241.2
60.3
1,367.9
48.3
193.7
58.6
26.4
1,996.4
Non-current
2020
£m
–
2.4
1.9
–
1.9
54.8
8.3
69.3
2019
£m
–
4.3
–
–
9.5
60.8
2.6
77.2
The Group finances the purchase of New vehicles for sale and a portion of Used vehicle inventories using vehicle funding facilities
provided by various lenders including the captive finance companies associated with brand partners. Such arrangements
generally are uncommitted facilities, have a maturity of 180 days or less and the Group is normally required to repay amounts
outstanding on the earlier of the sale of the vehicles that have been funded under the facilities or the stated maturity date. 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 (see note 7). At 31 December 2020, amounts outstanding
under vehicle funding facilities and on which interest was payable were subject to a weighted average interest rate of 1.3%
(2019 – 1.5%).
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.
£81.2m (2019 – £88.0m) of cash and cash equivalents is held in Ethiopia where prior approval is required to transfer funds abroad,
Included within deferred income are the following balances:
Extended warranties
Service packages
Other services
2020
£m
44.8
55.5
32.8
133.1
2019
£m
36.6
38.1
44.7
119.4
Revenue recognised in 2020 that was included in deferred revenue at the beginning of the year was £61.4m (2019 – £65.3m).
Extended warranties
Certain Group companies provide extended warranties to customers over and above those provided by the manufacturer and act
as the principal in the supply of the warranty service. The periods covered are up to six years and / or specific mileage limits. A
proportion of revenue is allocated to the extended warranty obligation and deferred to the balance sheet. The revenue is
subsequently recognised over time along with the costs incurred in fulfilling any warranty obligations.
Service packages
Certain Group companies provide service packages to customers as part of the total vehicle package. Where the Group acts as
principal, the value of the additional services is separately identified, deducted from revenue and recognised as deferred income
on the balance sheet. It is subsequently recognised as revenue when the service is provided or the package expires.
Other services
Certain Group companies provide other services as part of the total vehicle package (e.g. roadside assistance, fuel coupons etc).
Where the Group acts as principal, the value of the additional services is separately identified, deducted from revenue and
recognised as deferred income on the balance sheet. It is subsequently recognised as revenue over the period to which the
service relates.
Notes to the financial statements continued
18 Inventories
Raw materials and work in progress
Finished goods and merchandise
in the consolidated income statement.
19 Cash and cash equivalents
Cash at bank and cash equivalents
Short-term deposits
Vehicles held on consignment which are in substance assets of the Group amount to £159.2m (2019 – £167.2m). 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 a period of up to six months from delivery or the date
of sale.
An amount of £54.4m (2019 – £44.8m) 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 £5,656.1m (2019 – £7,504.9m). The write-down of inventory to net realisable value
recognised as an expense during the year was £21.2m (2019 – £22.2m). All of these items have been included within ‘cost of sales’
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 2020, the weighted average
floating rate was 0.28% (2019 – 0.42%).
and currency may not be available locally to effect such transfers.
At 31 December 2020, short-term deposits have a weighted average period to maturity of 15 days (2019 – 25 days).
20 Assets and liabilities held for sale and disposal group
Assets held for sale
Assets directly associated with the disposal group
Assets classified as held for sale and disposal group
Liabilities directly associated with the disposal group
1. Classification has been reassessed to conform to the current presentation.
The assets and liabilities in the disposal group comprise the following:
Goodwill
Property, plant and equipment
Right-of-use assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Trade and other payables
Lease liabilities
Other liabilities
Assets directly associated with the disposal group
Liabilities directly associated with the disposal group
Assets held for sale relate to surplus properties within the UK, Russia and Colombia which are actively marketed with a view to sale.
The disposal groups relate to the assets and liabilities attributable to Retail centres in the UK and Belgium. These sites are expected
to be disposed of during the next 12 months.
156
Inchcape plc Annual Report and Accounts 2020
2020
£m
45.7
2019
£m
33.2
1,170.5
1,216.2
1,533.7
1,566.9
2020
£m
378.5
102.7
481.2
2019
£m
321.5
101.5
423.0
2020
£m
7.5
23.7
31.2
2019
£m
(Restated)1
10.4
139.0
149.4
(7.7)
(106.1)
2020
£m
–
5.4
2.2
1.2
0.9
13.7
0.3
23.7
(5.1)
(1.3)
(1.3)
(7.7)
2019
£m
7.6
24.9
22.9
–
–
–
83.6
139.0
(76.4)
(29.7)
–
(106.1)
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 157
157
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
22 Provisions
At 1 January 2020
Reclassifications
Businesses acquired
Transferred to liabilities held for sale
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 2020
Analysed as:
Current
Non-current
Product
warranty
£m
10.6
–
–
8.3
(0.4)
0.1
(1.1)
0.9
18.4
Leasehold
£m
Litigation
£m
0.5
9.1
–
–
0.5
(0.4)
–
–
–
9.7
1.7
0.3
–
–
0.9
(0.5)
–
(0.1)
0.1
2.4
Other
£m
23.1
(9.4)
2.1
(0.1)
11.3
(4.1)
0.1
(7.0)
0.1
16.1
2020
£m
26.8
19.8
46.6
Total
£m
35.9
–
2.1
(0.1)
21.0
(5.4)
0.2
(8.2)
1.1
46.6
2019
£m
23.0
12.9
35.9
Product warranty
Certain Group companies provide assurance warranties as part of the sale of a vehicle. These are not separable products. The
warranty periods covered are up to five 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.
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, Australia and Hong Kong. Provision has been made to the extent of the estimated future net cost, excluding the lease
liability recognised under IFRS 16. This includes taking into account existing subtenant arrangements. The category also includes the
future obligation relating to the maintenance of premises. 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 claims that have been brought against various Group companies. The
claims are generally expected to be concluded within the next three years.
Other
This category principally includes provisions relating to uncertain non-income taxes recognised on acquisition of a business,
residual values on leased vehicles and provisions relating to restructuring activities. Acquisition related provisions total £4.2m, of
which there is an offsetting indemnity asset recognised in trade and other receivables. These provisions are expected to be utilised
within three years.
158
158
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Product
warranty
£m
10.6
–
–
8.3
(0.4)
0.1
(1.1)
0.9
18.4
Leasehold
Litigation
£m
0.5
9.1
–
–
0.5
(0.4)
–
–
–
9.7
£m
1.7
0.3
–
–
–
0.9
(0.5)
(0.1)
0.1
2.4
Other
£m
23.1
(9.4)
2.1
(0.1)
11.3
(4.1)
0.1
(7.0)
0.1
16.1
2020
£m
26.8
19.8
46.6
Total
£m
35.9
–
2.1
(0.1)
21.0
(5.4)
0.2
(8.2)
1.1
46.6
2019
£m
23.0
12.9
35.9
Notes to the financial statements continued
Transferred to liabilities held for sale
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
22 Provisions
At 1 January 2020
Reclassifications
Businesses acquired
At 31 December 2020
Analysed as:
Current
Non-current
Product warranty
Leasehold
next 10 years.
Litigation
Other
within three years.
Certain Group companies provide assurance warranties as part of the sale of a vehicle. These are not separable products. The
warranty periods covered are up to five 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.
The Group is committed to certain leasehold premises for which it no longer has a commercial use. These are principally located in
the UK, Australia and Hong Kong. Provision has been made to the extent of the estimated future net cost, excluding the lease
liability recognised under IFRS 16. This includes taking into account existing subtenant arrangements. The category also includes the
future obligation relating to the maintenance of premises. The expected utilisation period of these provisions is generally over the
This includes a number of litigation provisions in respect of claims that have been brought against various Group companies. The
claims are generally expected to be concluded within the next three years.
This category principally includes provisions relating to uncertain non-income taxes recognised on acquisition of a business,
residual values on leased vehicles and provisions relating to restructuring activities. Acquisition related provisions total £4.2m, of
which there is an offsetting indemnity asset recognised in trade and other receivables. These provisions are expected to be utilised
158
Inchcape plc Annual Report and Accounts 2020
23 Borrowings
2020
Current
Bank overdrafts
Non-current
Private Placement
Total borrowings
Floating rate
Weighted
average
effective
interest rate
%
–
–
–
£m
6.1
–
6.1
Fixed rate
Weighted
average
effective
interest rate
%
Total interest
bearing
£m
On which
no interest
is paid
£m
£m
–
–
6.1
210.0
210.0
3.0
3.0
210.0
216.1
2020
Total
£m
6.1
210.0
216.1
–
–
–
Bank overdrafts include £6.1m (2019 – £43.8m) held in cash pooling arrangements which have not been offset in the consolidated
statement of financial position (see note 24b).
2019
Current
Bank overdrafts
Bank loans
Non-current
Bank loans
Private Placement
Total borrowings
Floating rate
Weighted
average
effective
interest rate
%
0.8
1.0
0.8
1.1
–
1.1
1.0
£m
43.8
6.3
50.1
60.0
–
60.0
110.1
£m
–
–
–
–
210.0
210.0
210.0
Fixed rate
Weighted
average
effective
interest rate
%
Total interest
bearing
£m
On which
no interest
is paid
£m
–
–
–
–
3.0
3.0
3.0
43.8
6.3
50.1
60.0
210.0
270.0
320.1
–
–
–
–
–
–
–
2019
Total
£m
43.8
6.3
50.1
60.0
210.0
270.0
320.1
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).
At 31 December 2020, the committed funding facilities of the Group comprised a syndicated revolving credit facility of £700m (2019
– £700m) and sterling Private Placement loan notes totalling £210m (2019 – £210m). At 31 December 2020, £nil of the £700m was
drawn down (2019 – £60m of £700m).
In February 2019, the Group entered into a syndicated revolving credit facility of £700m with an initial expiry date of February 2024
and options, at lender discretion, to extend until 2026. Lenders approved the 1st extension option in February 2020 resulting in the
£700m commitment extending to 2025. Lenders with total commitments of £620m approved the 2nd extension option in February
2021, resulting in £620m of commitments being further extended to 2026. This facility replaced the Group’s existing syndicated
revolving credit facility agreement for £400m and existing bilateral facility agreements of £221m.
The £210m Sterling Private Placement loan notes are held at amortised cost. They have a fair value of £234.7m (2019 – £212.1m)
calculated from discounted cash flow techniques obtained using discount rates from observable market data, which is a level 2
valuation technique. The fair values of the Group’s other borrowings are not considered to be materially different from their
book value.
The Group applied and qualified for the Bank of England’s Covid Corporate Financing Facility (‘CCFF’) in April 2020. During the
year, the Group issued £100m under this facility with an original repayment date of 18 December 2020. The £100m issued under the
CCFF was fully repaid on 17 July 2020.
£nil of the Group’s bank loans are secured by term deposits placed under a standby letter of credit and related facility
arrangements (2019 – £nil). The Group’s bank overdrafts are secured by related offsetting cash balances held under pooling
arrangements. The Group’s remaining borrowings are unsecured.
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 159
159
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
23 Borrowings continued
In December 2016, the Group concluded a Private Placement transaction raising £210m to refinance existing US dollar Private
Placement borrowings which matured in May 2017. The amounts drawn under these facilities are as follows:
Maturity date
Amount drawn
Fixed rate coupon
May 2024
£70m
2.85%
May 2027
£30m
3.02%
May 2027
£70m
3.12%
May 2029
£40m
3.10%
All of the Group’s remaining US$161m US dollar Private Placement loan notes were repaid in May 2019.
The table below sets out the maturity profile of the Group’s existing borrowings that are exposed to interest rate risk.
2020
Fixed rate
Private Placement
Floating rate
Bank overdrafts
2019
Fixed rate
Private Placement
Floating rate
Bank overdrafts
Bank loans
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
–
6.1
–
–
–
–
70.0
–
–
–
140.0
210.0
–
6.1
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
–
43.8
6.3
–
–
–
–
–
–
–
–
–
70.0
140.0
210.0
–
60.0
–
–
43.8
66.3
160
160
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Notes to the financial statements continued
Maturity date
Amount drawn
Fixed rate coupon
2020
Fixed rate
Private Placement
Floating rate
Bank overdrafts
2019
Fixed rate
Private Placement
Floating rate
Bank overdrafts
Bank loans
Less than
Between 1
Between 2
Between 3
Between 4
Greater than
Total interest
1 year
and 2 years
and 3 years
and 4 years
and 5 years
5 years
bearing
£m
£m
£m
£m
£m
£m
£m
Less than
Between 1
Between 2
Between 3
Between 4
Greater than
Total interest
1 year
and 2 years
and 3 years
and 4 years
and 5 years
£m
£m
£m
£m
£m
5 years
£m
bearing
£m
–
6.1
–
43.8
6.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.1
70.0
140.0
210.0
–
60.0
–
–
43.8
66.3
160
Inchcape plc Annual Report and Accounts 2020
23 Borrowings continued
In December 2016, the Group concluded a Private Placement transaction raising £210m to refinance existing US dollar Private
Placement borrowings which matured in May 2017. The amounts drawn under these facilities are as follows:
May 2024
May 2027
May 2027
May 2029
£70m
2.85%
£30m
3.02%
£70m
3.12%
£40m
3.10%
All of the Group’s remaining US$161m US dollar Private Placement loan notes were repaid in May 2019.
The table below sets out the maturity profile of the Group’s existing borrowings that are exposed to interest rate risk.
24 Financial instruments
The Group’s financial liabilities, other than derivatives, comprise overdrafts, loan notes, trade and other payables and lease
liabilities. 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 include forward and swap currency contracts. 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. Classification of financial instruments
70.0
140.0
210.0
2020
Measured at
amortised
cost
£m
Measured at
fair value
through other
comprehensive
income
£m
Measured at
fair value
through profit
or loss
£m
Financial assets
Financial assets at fair value through other comprehensive income
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Total financial assets
Financial liabilities
Trade and other payables
Derivative financial instruments
Lease liabilities
Borrowings
Total financial liabilities
–
336.4
–
481.2
817.6
(1,395.5)
–
(332.8)
(216.1)
(1,944.4)
(1,126.8)
3.8
–
0.2
–
4.0
–
(7.5)
–
–
(7.5)
(3.5)
2019
Financial assets
Financial assets at fair value through other comprehensive income
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Total financial assets
Financial liabilities
Trade and other payables
Derivative financial instruments
Lease liabilities
Borrowings
Total financial liabilities
Total
£m
3.8
336.4
13.3
481.2
834.7
–
–
13.1
–
13.1
–
(34.9)
–
–
(34.9)
(21.8)
(1,395.5)
(42.4)
(332.8)
(216.1)
(1,986.8)
(1,152.1)
Total
£m
7.1
490.2
16.2
423.0
936.5
–
–
15.3
–
15.3
–
(24.1)
–
–
(24.1)
(8.8)
(1,885.4)
(27.4)
(352.8)
(320.1)
(2,585.7)
(1,649.2)
Measured at
amortised
cost
£m
Measured at
fair value
through other
comprehensive
income
£m
Measured at
fair value
through profit
or loss
£m
–
490.2
–
423.0
913.2
(1,885.4)
–
(352.8)
(320.1)
(2,558.3)
(1,645.1)
7.1
–
0.9
–
8.0
–
(3.3)
–
–
(3.3)
4.7
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 161
161
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
24 Financial instruments continued
b. Offsetting financial assets and financial liabilities
The following financial assets are subject to offsetting, enforceable netting arrangements and similar agreements:
Gross amounts of
financial liabilities set
off in the statement of
financial position
£m
Net amounts
of financial assets
presented in the
statement of
financial position
£m
Gross amounts of
financial assets
£m
Related amounts not set
off in the statement of
financial position
Financial
instruments
£m
Cash
collateral
received
£m
13.3
481.2
494.5
16.2
423.0
439.2
–
–
–
–
–
–
13.3
481.2
494.5
16.2
423.0
439.2
(13.1)
(6.1)
(19.2)
(8.3)
(43.8)
(52.1)
–
–
–
–
–
–
Gross amounts of
financial assets set off
in the statement of
financial position
£m
Net amounts
of financial liabilities
presented in the
statement of
financial position
£m
Gross amounts of
financial liabilities
£m
Related amounts not set
off in the statement of
financial position
Financial
instruments
£m
Cash
collateral
paid
£m
(42.4)
(6.1)
(48.5)
(27.4)
(43.8)
(71.2)
–
–
–
–
–
–
(42.4)
(6.1)
(48.5)
(27.4)
(43.8)
(71.2)
13.1
6.1
19.2
8.3
43.8
52.1
–
–
–
–
–
–
Net
amount
£m
0.2
475.1
475.3
7.9
379.2
387.1
Net
amount
£m
(29.3)
–
(29.3)
(19.1)
–
(19.1)
As at 31 December 2020
Derivative financial assets
Cash and cash equivalents
Total
As at 31 December 2019
Derivative financial assets
Cash and cash equivalents
Total
As at 31 December 2020
Derivative financial liabilities
Bank overdrafts
Total
As at 31 December 2019
Derivative financial liabilities
Bank overdrafts
Total
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 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.
162
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Notes to the financial statements continued
24 Financial instruments continued
b. Offsetting financial assets and financial liabilities
The following financial assets are subject to offsetting, enforceable netting arrangements and similar agreements:
Gross amounts of
of financial assets
financial liabilities set
presented in the
Net amounts
Gross amounts of
off in the statement of
statement of
Financial
financial assets
financial position
financial position
instruments
£m
£m
£m
£m
Related amounts not set
off in the statement of
financial position
Cash
collateral
received
£m
As at 31 December 2020
Derivative financial assets
Cash and cash equivalents
Total
Total
As at 31 December 2019
Derivative financial assets
Cash and cash equivalents
As at 31 December 2020
Derivative financial liabilities
Bank overdrafts
Total
As at 31 December 2019
Derivative financial liabilities
Bank overdrafts
Total
–
–
–
–
–
–
–
–
–
–
–
–
13.3
481.2
494.5
16.2
423.0
439.2
(13.1)
(6.1)
(19.2)
(8.3)
(43.8)
(52.1)
(42.4)
(6.1)
(48.5)
(27.4)
(43.8)
(71.2)
13.1
6.1
19.2
8.3
43.8
52.1
Net
amount
£m
0.2
475.1
475.3
7.9
379.2
387.1
(29.3)
–
(29.3)
(19.1)
–
(19.1)
–
–
–
–
–
–
–
–
–
–
–
–
Gross amounts of
of financial liabilities
financial assets set off
presented in the
Net amounts
Gross amounts of
financial liabilities
in the statement of
financial position
statement of
Financial
collateral
financial position
instruments
£m
£m
£m
Cash
paid
£m
Net
amount
£m
Related amounts not set
off in the statement of
financial position
13.3
481.2
494.5
16.2
423.0
439.2
£m
(42.4)
(6.1)
(48.5)
(27.4)
(43.8)
(71.2)
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 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.
24 Financial instruments continued
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 Japanese yen exchange rate with both the Australian dollar and
Chilean peso.
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; and
– 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.
Instruments approved for the purpose of hedging interest rate risk 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 loan notes that expired in 2019, 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 2020 with all other variables held constant.
2020
Sterling
Euro
Russian rouble
Australian dollar
US dollar
2019
Sterling
Euro
Russian rouble
Australian dollar
US dollar
Increase
in basis
points
Effect on
profit
before tax
£m
75
50
500
100
75
75
50
500
100
75
(7.4)
0.1
0.8
3.0
0.3
(10.6)
0.3
0.7
3.1
0.4
162
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Inchcape Annual Report and Accounts 2020 163
163
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
24 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 in that
unit’s reporting 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 Australia which purchases vehicles in Japanese yen and our South and Central
American businesses which purchase vehicles in Japanese yen and US dollars.
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 IFRS 9 hedges are documented and tested for
the hedge effectiveness on an ongoing basis.
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.
2020
Yen
Yen
2019
Yen
Yen
Increase /
(decrease) in
exchange
rate
Effect on
equity
£m
+10%
-10%
+10%
-10%
(0.1)
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.
164
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Notes to the financial statements continued
24 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 in that
unit’s reporting 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 Australia which purchases vehicles in Japanese yen and our South and Central
American businesses which purchase vehicles in Japanese yen and US dollars.
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 IFRS 9 hedges are documented and tested for
the hedge effectiveness on an ongoing basis.
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.
2020
Yen
Yen
2019
Yen
Yen
f. Credit risk
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
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.
24 Financial instruments continued
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
BBB-
No rating*
Derivative
assets
£m
1.6
0.4
8.0
2.0
–
–
0.7
0.6
13.3
2020
Short-term
deposits
£m
–
–
20.0
–
–
6.9
–
75.8
102.7
Derivative
assets
£m
0.5
1.5
9.3
1.6
0.1
–
0.1
3.1
16.2
2019
Short-term
deposits
£m
1.0
–
2.0
1.0
1.0
22.0
–
74.5
101.5
Increase /
(decrease) in
exchange
rate
Effect on
equity
£m
+10%
-10%
+10%
-10%
(0.1)
0.1
–
(0.1)
* Counterparties in certain markets in which the Group operates do not have a credit rating.
For those counterparties which do not have a credit rating, where possible the Group works with partner banks with a local
presence to provide additional assurance. Additionally, the Group proactively repatriates cash through cash-pooling
arrangements, loans between Group companies and dividends as well as regularly monitoring the spread of counterparties in
country, notably in Ethiopia.
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, receivables and other financial assets is represented by their carrying amount.
Total cash at bank of £378.5m (2019 – £321.5m) 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.
164
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Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 165
165
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
24 Financial instruments continued
g. Liquidity risk
Prudent liquidity risk management includes 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 2020 based on
contractual expected undiscounted cash flows:
2020
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through other comprehensive income
Derivative financial instruments
Financial liabilities
Interest bearing loans and borrowings
Lease liabilities
Trade and other payables
Derivative financial instruments
Net outflows
2019
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through other comprehensive income
Derivative financial instruments
Financial liabilities
Interest bearing loans and borrowings
Lease liabilities
Trade and other payables
Derivative financial instruments
Net outflows
Less than
3 months
£m
Between
3 to 12
months
£m
Between
1 to 5 years
£m
Greater than
5 years
£m
473.7
227.8
0.2
11.7
713.4
7.5
70.1
–
1.6
79.2
–
31.9
–
–
31.9
–
6.6
3.6
–
10.2
Total
£m
481.2
336.4
3.8
13.3
834.7
(6.1)
(17.7)
(1,140.9)
(23.1)
(1,187.8)
(474.4)
(6.3)
(49.8)
(241.3)
(19.3)
(316.7)
(237.5)
(92.1)
(174.4)
(12.9)
–
(279.4)
(247.5)
(148.5)
(171.5)
(0.4)
–
(320.4)
(310.2)
(253.0)
(413.4)
(1,395.5)
(42.4)
(2,104.3)
(1,269.6)
Less than
3 months
£m
(Restated)1
Between
3 to 12
months
£m
(Restated)1
Between
1 to 5 years
£m
(Restated)1
Greater than
5 years
£m
(Restated)1
Total
£m
(Restated)1
414.3
387.1
0.2
10.6
812.2
(44.0)
(19.2)
(1,619.6)
(18.7)
(1,701.5)
(889.3)
8.7
59.9
–
5.6
74.2
(6.8)
(54.1)
(251.4)
(8.7)
(321.0)
(246.8)
–
33.3
–
–
33.3
(156.9)
(209.2)
(14.4)
–
(380.5)
(347.2)
–
13.0
6.9
–
19.9
423.0
493.3
7.1
16.2
939.6
(150.4)
(209.5)
–
–
(359.9)
(340.0)
(358.1)
(492.0)
(1,885.4)
(27.4)
(2,762.9)
(1,823.3)
1. The comparative has been restated to ensure undiscounted cash flows for lease liabilities are disclosed appropriately.
166
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Inchcape plc Annual Report and Accounts 2020
24 Financial instruments continued
g. Liquidity risk
Prudent liquidity risk management includes 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.
24 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:
The table below summarises the maturity profile of the Group’s financial assets and liabilities at 31 December 2020 based on
– 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
Financial assets at fair value through other
comprehensive income
Liabilities
Derivatives used for hedging
Level 1
£m
Level 2
£m
Level 3
£m
2020
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
2019
Total
£m
–
13.3
–
13.3
–
16.2
–
16.2
0.5
0.5
–
13.3
3.3
3.3
3.8
17.1
0.5
0.5
–
16.2
6.6
6.6
7.1
23.3
–
(42.4)
–
(42.4)
–
(27.4)
–
(27.4)
Level 1 represents the fair value of financial instruments that are traded in active markets and is based on quoted markets price at
the end of the reporting period.
The fair value of financial instruments that are not traded in an active market (level 2) is determined by using valuation techniques
which include the present value of estimated future cash flows. These valuation techniques maximise the use of observable market
data where it is available and rely as little as possible on entity specific estimates.
Level 3 primarily represents the Group’s equity interest in Hino Motors Manufacturing Company SAS (see note 15). Fair value is
based on discounted free cash flows, using the projection of annual income and expenses mainly based on historical financial
figures.
Derivative financial instruments are carried at their fair values. The fair value of forward foreign exchange contracts and foreign
exchange swaps represents the difference between the value of the outstanding contracts at their contracted rates and a
valuation calculated using the spot rates of exchange prevailing at 31 December 2020.
The Group’s derivative financial instruments comprise the following:
Forward foreign exchange contracts
2020
£m
13.3
Assets
2019
£m
2020
£m
Liabilities
2019
£m
16.2
(42.4)
(27.4)
The ineffective portion recognised in the consolidated income statement that arises from fair value hedges amounts to £nil (2019 –
loss of £0.1m). The ineffective portion recognised in the consolidated income statement that arises from cash flow hedges amounts
to £nil (2019 – £nil).
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
(2019 – 12 months) of the end of the reporting period.
The nominal principal amount of the outstanding forward foreign exchange contracts relating to transactional exposures at
31 December 2020 was £1,056.0m (2019 – £804.5m).
Net fair value gains and losses recognised in the hedging reserve in shareholders’ equity (see note 26) on forward foreign
exchange contracts as at 31 December 2020 are expected to be released to the consolidated income statement within 12 months
of the end of the reporting period (2019 – 12 months).
Notes to the financial statements continued
contractual expected undiscounted cash flows:
2020
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through other comprehensive income
Derivative financial instruments
Financial liabilities
Interest bearing loans and borrowings
Lease liabilities
Trade and other payables
Derivative financial instruments
Net outflows
2019
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through other comprehensive income
Derivative financial instruments
Financial liabilities
Interest bearing loans and borrowings
Lease liabilities
Trade and other payables
Derivative financial instruments
Net outflows
Less than
3 months
£m
Between
3 to 12
months
£m
Between
Greater than
1 to 5 years
£m
5 years
£m
473.7
227.8
0.2
11.7
713.4
7.5
70.1
–
1.6
79.2
31.9
–
–
–
–
6.6
3.6
–
31.9
10.2
Total
£m
481.2
336.4
3.8
13.3
834.7
(6.1)
(17.7)
(6.3)
(49.8)
(1,140.9)
(241.3)
(23.1)
(1,187.8)
(474.4)
(19.3)
(316.7)
(237.5)
(92.1)
(174.4)
(12.9)
–
(279.4)
(247.5)
(148.5)
(171.5)
(253.0)
(413.4)
(0.4)
(1,395.5)
–
(42.4)
(320.4)
(2,104.3)
(310.2)
(1,269.6)
Less than
3 months
£m
Between
3 to 12
months
£m
Between
Greater than
1 to 5 years
£m
5 years
£m
Total
£m
(Restated)1
(Restated)1
(Restated)1
(Restated)1
(Restated)1
414.3
387.1
0.2
10.6
812.2
8.7
59.9
–
5.6
74.2
(44.0)
(19.2)
(6.8)
(54.1)
(1,619.6)
(251.4)
(18.7)
(1,701.5)
(889.3)
(8.7)
(321.0)
(246.8)
33.3
–
–
–
33.3
(156.9)
(209.2)
(14.4)
–
(380.5)
(347.2)
–
13.0
6.9
–
19.9
423.0
493.3
7.1
16.2
939.6
(150.4)
(209.5)
–
–
(358.1)
(492.0)
(1,885.4)
(27.4)
(359.9)
(2,762.9)
(340.0)
(1,823.3)
1. The comparative has been restated to ensure undiscounted cash flows for lease liabilities are disclosed appropriately.
166
Inchcape plc Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
167
Inchcape Annual Report and Accounts 2020 167
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
24 Financial instruments continued
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. Due to the
impact of COVID-19, some limited exceptions to policy are in place, to reflect the significant amount of cash the Group currently
holds, to increase the counterparty risk limits set for certain counterparties.
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 Group uses return on capital employed (ROCE) as a measure of its ability to drive better returns on the capital invested in the
Group’s operations.
Return on capital employed
2020
12.3%
2019
22.2%
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. The leverage tests are measured excluding the impact of IFRS 16.
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.
25 Share capital
a. Allotted, called up and fully paid up
2020
97.2
n/a
n/a
2019
133.3
n/a
n/a
Issued and fully paid ordinary shares (nominal value of 10.0p each)
At 1 January
Allotted under share option schemes
Cancelled under share buyback
At 31 December
2020
Number
2019
Number
399,132,736
–
(5,858,343)
393,274,393
415,127,453
75,353
(16,070,070)
399,132,736
2020
£m
40.0
–
(0.6)
39.4
2019
£m
41.6
–
(1.6)
40.0
b. Share buyback programme
During 2020, the Company repurchased 5,858,343 (2019 – 16,070,070) of its own shares through purchases on the London Stock
Exchange, at a cost of £29.8m (2019 – £98.5m). The shares repurchased during the year were cancelled, with none held within
treasury shares at the end of the reporting period. An amount of £0.6m (2019 – £1.6m), equivalent to the nominal value of the
cancelled shares, has been transferred to the capital redemption reserve. Costs of £1.6m (2019 – £1.5m) associated with the
transfer to the Company of the repurchased shares and their subsequent cancellation have been charged to the profit and
loss reserve.
During the year, the Group had a contract in place with a broker to purchase its own shares for cash in connection with the £150m
buyback announced on 27 February 2020. On 20 March 2020, given the uncertainty around the COVID-19 pandemic, the Group
served notice to its broker to terminate the buyback effective 24 March 2020.
c. Substantial shareholdings
Details of substantial interests in the Company’s issued ordinary share capital received by the Company at 24 February 2021 under
the provisions of the Companies Act 2006 have been disclosed in the significant shareholdings section of the Corporate
Governance Report.
168
168
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Notes to the financial statements continued
24 Financial instruments continued
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. Due to the
impact of COVID-19, some limited exceptions to policy are in place, to reflect the significant amount of cash the Group currently
holds, to increase the counterparty risk limits set for certain counterparties.
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
The Group uses return on capital employed (ROCE) as a measure of its ability to drive better returns on the capital invested in the
business plan.
Group’s operations.
Return on capital employed
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. The leverage tests are measured excluding the impact of IFRS 16.
2020
12.3%
2019
22.2%
2020
97.2
n/a
n/a
2019
133.3
n/a
n/a
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.
25 Share capital
a. Allotted, called up and fully paid up
Issued and fully paid ordinary shares (nominal value of 10.0p each)
At 1 January
Allotted under share option schemes
Cancelled under share buyback
At 31 December
b. Share buyback programme
2020
Number
2019
Number
399,132,736
415,127,453
–
75,353
(5,858,343)
(16,070,070)
393,274,393
399,132,736
2020
£m
40.0
–
(0.6)
39.4
2019
£m
41.6
–
(1.6)
40.0
During 2020, the Company repurchased 5,858,343 (2019 – 16,070,070) of its own shares through purchases on the London Stock
Exchange, at a cost of £29.8m (2019 – £98.5m). The shares repurchased during the year were cancelled, with none held within
treasury shares at the end of the reporting period. An amount of £0.6m (2019 – £1.6m), equivalent to the nominal value of the
cancelled shares, has been transferred to the capital redemption reserve. Costs of £1.6m (2019 – £1.5m) associated with the
transfer to the Company of the repurchased shares and their subsequent cancellation have been charged to the profit and
loss reserve.
During the year, the Group had a contract in place with a broker to purchase its own shares for cash in connection with the £150m
buyback announced on 27 February 2020. On 20 March 2020, given the uncertainty around the COVID-19 pandemic, the Group
served notice to its broker to terminate the buyback effective 24 March 2020.
c. Substantial shareholdings
Governance Report.
Details of substantial interests in the Company’s issued ordinary share capital received by the Company at 24 February 2021 under
the provisions of the Companies Act 2006 have been disclosed in the significant shareholdings section of the Corporate
168
Inchcape plc Annual Report and Accounts 2020
25 Share capital continued
d. Share options
At 31 December 2020, 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
The Inchcape SAYE Share Option Scheme
– approved
124,733
348,618
625,032
1,686,385
Exercisable until
1 May 2021
1 May 2022
1 May 2023
1 May 2024
Option price
(£)
6.66
5.54
4.59
3.77
Included within the retained earnings reserve are 167,312 (2019 – 861,589) 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 2020 was £1.0m (2019 – £5.5m). The market value of these shares at both
31 December 2020 and 24 February 2021 was £1.1m and £1.2m respectively (31 December 2019 – £6.1m, 27 February 2019 – £5.1m).
26 Other reserves
At 1 January 2019
Cash flow hedges:
– Fair value movements
– Reclassified and reported in inventories
Tax on above items
Other currency translation differences
At 1 January 2020
Cash flow hedges:
– Fair value movements
– Reclassified and reported in inventories
Other fair value movements
Tax on above items
Other currency translation differences
At 31 December 2020
Fair value
through OCI
reserve
£m
–
–
–
–
–
–
–
–
–
(2.7)
0.3
–
(2.4)
Translation
reserve
£m
Hedging
reserve
£m
Total other
reserves
£m
(77.1)
1.2
(75.9)
–
–
–
(97.1)
(174.2)
–
–
–
–
(51.8)
(226.0)
(41.0)
16.4
7.2
–
(16.2)
(4.8)
1.5
–
(0.6)
–
(20.1)
(41.0)
16.4
7.2
(97.1)
(190.4)
(4.8)
1.5
(2.7)
(0.3)
(51.8)
(248.5)
The effect of foreign exchange rate changes includes a gain of £8.4m (2019 – gain of £2.7m) on the sale and 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’.
Fair value through OCI reserve
For investments in equity instruments that are measured at fair value through other comprehensive income, changes in fair value
are recognised through OCI. Fair value movements are never recycled to the income statement, even if the underlying asset is sold,
impaired or otherwise derecognised.
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.
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 169
169
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
27 Retained earnings
At 1 January
Total comprehensive (loss) / income attributable to owners of the parent for the year:
– (Loss) / profit for the year
– Actuarial gains / (losses) on defined pension benefits (see note 5)
– Tax (charged) / credited to reserves
Total comprehensive (loss) / income for the year
Share-based payments, net of tax
Share buyback programme
Net purchase of own shares by Inchcape Employee Trust
Dividends paid (see note 10)
At 31 December
28 Notes to the consolidated statement of cash flows
a. Reconciliation of cash generated from operations
Cash flows from operating activities
Operating (loss) / profit
Exceptional items (see note 2)
Amortisation of intangible assets
Depreciation of property, plant and equipment
Depreciation of right-of-use assets (including non-exceptional impairment charges)
Profit on disposal of property, plant and equipment
Gain on disposal of right-of-use assets
Share-based payments charge
Decrease in inventories
Decrease / (increase) in trade and other receivables
Decrease in trade and other payables
Increase in provisions
Pension contributions less than the pension charge for the year1
Decrease in interest in leased vehicles
Payments in respect of operating exceptional items
Other non-cash items
Cash generated from operations
1. Includes additional payments of £3.7m (2019 – £2.8m).
2020
£m
2019
£m
1,141.4
1,093.1
(140.1)
14.8
(2.8)
(128.1)
3.7
(31.4)
–
–
985.6
322.9
(71.7)
10.1
261.3
6.8
(100.0)
(9.3)
(110.5)
1,141.4
2020
£m
2019
£m
(91.6)
257.1
18.4
35.3
54.0
–
(1.6)
3.3
351.0
124.4
(413.0)
5.1
3.3
15.9
(24.3)
1.5
338.8
448.6
(75.5)
16.0
42.6
66.3
(4.4)
(0.1)
6.1
94.8
(29.4)
(121.5)
1.7
2.3
7.3
(10.5)
1.6
445.9
170
170
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Notes to the financial statements continued
Total comprehensive (loss) / income attributable to owners of the parent for the year:
27 Retained earnings
At 1 January
– (Loss) / profit for the year
– Actuarial gains / (losses) on defined pension benefits (see note 5)
– Tax (charged) / credited to reserves
Total comprehensive (loss) / income for the year
Share-based payments, net of tax
Share buyback programme
Net purchase of own shares by Inchcape Employee Trust
Dividends paid (see note 10)
At 31 December
28 Notes to the consolidated statement of cash flows
a. Reconciliation of cash generated from operations
Cash flows from operating activities
Operating (loss) / profit
Exceptional items (see note 2)
Amortisation of intangible assets
Depreciation of property, plant and equipment
Depreciation of right-of-use assets (including non-exceptional impairment charges)
Profit on disposal of property, plant and equipment
Gain on disposal of right-of-use assets
Share-based payments charge
Decrease in inventories
Decrease / (increase) in trade and other receivables
Decrease in trade and other payables
Increase in provisions
Pension contributions less than the pension charge for the year1
Decrease in interest in leased vehicles
Payments in respect of operating exceptional items
Other non-cash items
Cash generated from operations
1. Includes additional payments of £3.7m (2019 – £2.8m).
170
Inchcape plc Annual Report and Accounts 2020
2020
£m
2019
£m
1,141.4
1,093.1
(140.1)
14.8
(2.8)
(128.1)
3.7
322.9
(71.7)
10.1
261.3
6.8
(31.4)
(100.0)
–
–
(9.3)
(110.5)
985.6
1,141.4
2020
£m
2019
£m
(91.6)
257.1
18.4
35.3
54.0
–
(1.6)
3.3
351.0
124.4
(413.0)
5.1
3.3
15.9
(24.3)
1.5
338.8
448.6
(75.5)
16.0
42.6
66.3
(4.4)
(0.1)
6.1
94.8
(29.4)
(121.5)
1.7
2.3
7.3
(10.5)
1.6
445.9
28 Notes to the consolidated statement of cash flows continued
b. Net debt reconciliation
Net debt at 1 January 2019
Cash flows
Acquisitions
Disposals
New lease liabilities
Transferred to liabilities held for sale
Foreign exchange adjustments
Net movement in fair value
Net debt at 1 January 2020
Cash flows
Acquisitions
Disposals
New lease liabilities
Transferred to liabilities held for sale
Foreign exchange adjustments
Net debt at 31 December 2020
Net debt is analysed as follows:
Liabilities from financing activities
Assets
Borrowings
£m
(448.9)
197.4
(22.9)
–
–
–
(1.8)
(0.1)
(276.3)
66.1
–
–
–
–
0.2
(210.0)
Leases
£m
(460.4)
65.7
(12.5)
41.8
(30.2)
30.1
12.7
–
(352.8)
57.4
(1.1)
–
(35.7)
1.0
(1.6)
(332.8)
Sub-total
£m
(909.3)
263.1
(35.4)
41.8
(30.2)
30.1
10.9
(0.1)
(629.1)
123.5
(1.1)
–
(35.7)
1.0
(1.4)
(542.8)
Cash / bank
overdrafts
£m
463.4
(214.0)
(41.2)
230.4
–
–
(59.4)
–
379.2
55.3
(31.5)
73.5
–
–
(0.2)
476.3
Cash and cash equivalents as per the statement of financial position
Cash and cash equivalents included in disposal groups held for sale
Borrowings – disclosed as current liabilities
Add back: amounts treated as debt financing (see below)
Cash and cash equivalents as per the statement of cash flows
Debt financing
Borrowings – disclosed as current liabilities and treated as debt financing (see above)
Borrowings – disclosed as non-current liabilities
Lease liabilities
Debt financing
Net debt
Add back: lease liabilities
Net cash
2020
£m
481.2
1.2
(6.1)
–
476.3
–
(210.0)
(332.8)
(542.8)
(66.5)
332.8
266.3
Total
net debt
£m
(445.9)
49.1
(76.6)
272.2
(30.2)
30.1
(48.5)
(0.1)
(249.9)
178.8
(32.6)
73.5
(35.7)
1.0
(1.6)
(66.5)
2019
£m
423.0
–
(50.1)
6.3
379.2
(6.3)
(270.0)
(352.8)
(629.1)
(249.9)
352.8
102.9
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 171
171
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
29 Acquisitions and disposals
a. Acquisitions
On 24 March 2020, the Group acquired the Mercedes-Benz passenger car and private vans Distribution operations in Colombia
from Daimler Colombia S.A., for a total cash consideration of £27.1m. A distribution agreement with a provisional fair value of
£14.2m has been recognised at the date of acquisition. The business was acquired to strengthen the Group’s partnership with
Daimler-Mercedes-Benz in South America and follows on from the acquisition on 2 December 2019 of Autolider, the distributor of
certain Daimler brands such as Mercedes-Benz passenger and commercial vehicles, Freightliner and Fuso in Uruguay and
Mercedes-Benz passenger and commercial vehicles in Ecuador.
Details of the provisional fair values of the identifiable assets and liabilities as at the date of acquisition are set out below:
Assets and liabilities acquired
Distribution agreements recognised on acquisition (see note 11)
Property, plant and equipment
Right-of-use assets
Inventory
Lease liabilities
Provisions
Net identifiable assets
Goodwill
Net assets acquired
Consideration comprises
Cash consideration
Total consideration
Revenue and profit contribution
Income statement items
Revenue recognised since the acquisition date in the consolidated income statement
Profit after tax since the acquisition date in the consolidated income statement
Fair value
£m
14.2
0.4
0.6
13.3
(0.6)
(0.8)
27.1
–
27.1
27.1
27.1
Total
£m
41.7
0.4
Other acquisitions
On 31 July 2020, the Group was awarded the Daimler Distribution contract in El Salvador and entered into an asset purchase
agreement to acquire assets from the exiting distributor, with a cash purchase price at completion of £0.8m. During the year, the
Group also entered into distribution contracts with BMW to distribute the MINI and Motorrad brands in Peru and the MINI brand in
Chile. The total cost of these acquisitions was £3.6m. Total goodwill arising on the transactions was £0.5m.
Measurement period adjustments
During the year, adjustments have been made to the fair value of assets and liabilities acquired in business combinations in 2019.
These fair value adjustments were not material and therefore prior periods have not been restated. These changes, together with
the finalisation of the purchase consideration, have resulted in an increase in the amount of goodwill recognised on acquisition
of £0.7m.
Cash outflow to acquire businesses, net of cash and overdrafts acquired
Cash consideration
Less: Cash acquired
Net cash outflow
2020
£m
31.5
–
31.5
2019
£m
43.4
(2.2)
41.2
172
172
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Notes to the financial statements continued
29 Acquisitions and disposals
a. Acquisitions
On 24 March 2020, the Group acquired the Mercedes-Benz passenger car and private vans Distribution operations in Colombia
from Daimler Colombia S.A., for a total cash consideration of £27.1m. A distribution agreement with a provisional fair value of
£14.2m has been recognised at the date of acquisition. The business was acquired to strengthen the Group’s partnership with
Daimler-Mercedes-Benz in South America and follows on from the acquisition on 2 December 2019 of Autolider, the distributor of
certain Daimler brands such as Mercedes-Benz passenger and commercial vehicles, Freightliner and Fuso in Uruguay and
Mercedes-Benz passenger and commercial vehicles in Ecuador.
Details of the provisional fair values of the identifiable assets and liabilities as at the date of acquisition are set out below:
Assets and liabilities acquired
Property, plant and equipment
Distribution agreements recognised on acquisition (see note 11)
Right-of-use assets
Inventory
Lease liabilities
Provisions
Net identifiable assets
Goodwill
Net assets acquired
Consideration comprises
Cash consideration
Total consideration
Revenue and profit contribution
Income statement items
Other acquisitions
Revenue recognised since the acquisition date in the consolidated income statement
Profit after tax since the acquisition date in the consolidated income statement
On 31 July 2020, the Group was awarded the Daimler Distribution contract in El Salvador and entered into an asset purchase
agreement to acquire assets from the exiting distributor, with a cash purchase price at completion of £0.8m. During the year, the
Group also entered into distribution contracts with BMW to distribute the MINI and Motorrad brands in Peru and the MINI brand in
Chile. The total cost of these acquisitions was £3.6m. Total goodwill arising on the transactions was £0.5m.
Measurement period adjustments
During the year, adjustments have been made to the fair value of assets and liabilities acquired in business combinations in 2019.
These fair value adjustments were not material and therefore prior periods have not been restated. These changes, together with
the finalisation of the purchase consideration, have resulted in an increase in the amount of goodwill recognised on acquisition
Cash outflow to acquire businesses, net of cash and overdrafts acquired
of £0.7m.
Cash consideration
Less: Cash acquired
Net cash outflow
2020
£m
31.5
–
31.5
2019
£m
43.4
(2.2)
41.2
Fair value
£m
14.2
0.4
0.6
13.3
(0.6)
(0.8)
27.1
–
27.1
27.1
27.1
Total
£m
41.7
0.4
172
Inchcape plc Annual Report and Accounts 2020
29 Acquisitions and disposals continued
b. Disposals
Assets and liabilities disposed of
Goodwill
Property, plant and equipment
Right-of-use assets
Tax assets
Inventory
Trade and other payables
Provisions
Lease liabilities
Net assets disposed of
Consideration received
Disposal costs incurred
(Loss) / gain on disposal
Australia
Retail
£m
UK Retail
£m
Total
£m
5.5
2.4
11.7
0.2
21.9
(19.1)
(0.4)
(15.5)
6.7
6.1
–
(0.6)
2.1
53.5
9.3
–
40.8
(36.8)
–
(13.8)
55.1
59.5
(1.5)
2.9
7.6
55.9
21.0
0.2
62.7
(55.9)
(0.4)
(29.3)
61.8
65.6
(1.5)
2.3
During the period, the Group continued to optimise its UK Retail portfolio and has disposed of 13 sites, generating disposal
proceeds of £59.5m. In Australia, two further sites in our Retail business were disposed of in February 2020, generating disposal
proceeds of £6.1m. The Group also received deferred consideration of £7.9m and incurred £0.4m of costs relating to the disposal of
Retail operations in China in 2019.
None of these disposals are material enough to be shown as discontinued operations on the face of the consolidated income
statement as they do not represent a separate major line of business or geographical area of operations.
c. 2019 acquisitions and disposals
In 2019, the Group acquired the full share capital of Krasta Auto in Lithuania, an authorised dealer of BMW Group, from Modus
Group for a total cash consideration of £16.3m (net of cash acquired). The business was acquired to strengthen the Group’s
partnership with BMW in Northern Europe. A distribution agreement with a fair value of £19.0m has been recognised at the date of
acquisition. The goodwill arising on the acquisition represents intangible assets that do not qualify for separate recognition and the
premium paid to complete the Group’s consolidation of BMW’s representation across the Baltic region. None of the goodwill is
expected to be deductible for tax purposes.
The Group also acquired the full share capital of Autolider, a distributor of Mercedes-Benz passenger and commercial vehicles in
both Uruguay and Ecuador, for cash consideration of £24.9m (net of cash acquired) and contingent consideration with a fair
value of £3.9m. A distribution agreement with a provisional fair value of £14.2m has been recognised at the date of acquisition.
This business builds further on the Group’s presence in Latin America, adding two new markets, and is consistent with the focus on
core Distribution capabilities. The goodwill arising on the acquisition represents intangible assets that do not qualify for separate
recognition and the Group strengthening its Latin American platform. None of the goodwill is expected to be deductible for
tax purposes.
The Group disposed of six Retail sites in Australia and seven in the UK, generating disposal proceeds of £96.6m. Additionally, the
Group sold its Retail sites in China for total proceeds of £91.9m, out of which £8.1m was deferred for payment over 12 months, as
well as the Inchcape Fleet Solutions business for cash proceeds of £100m.
30 Guarantees and contingencies
Guarantees
Performance bonds
Contingent liabilities
2020
£m
42.9
19.0
9.2
71.1
2019
£m
48.8
15.9
10.4
75.1
The Group also has, in the ordinary course of business, commitments under foreign exchange instruments relating to the hedging
of transactional exposures (see note 24).
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 23 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.
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 173
173
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
30 Guarantees and contingencies continued
HMRC was previously granted leave to appeal a number of items at the Supreme Court. The first of these hearings was in February
2020 and the second hearing occurred in December 2020. The judgment for the February hearing was handed on 20 November
2020. HMRC argued that Limitation Act 1980 applies only to mistakes of fact and not to mistakes of law, or alternatively that the Test
Claimants could reasonably have discovered their mistake more than six years before they issued their claims in 2003. On either
approach, a proportion of the claims would be time-barred. The Supreme Court unanimously allowed the appeal but only on the
basis that time limit for the claim begins to run when the claimant discovers their mistake in the sense of recognising that they have
a worthwhile claim. The Supreme Court has therefore returned the test case to the High Court to establish when the claimant could
have reasonably discovered the relevant mistake.
Therefore, resolution of the test case in the FII GLO remains incomplete. As at 31 December 2020, no further receipts have been
recognised in relation to the balance of Inchcape’s claim in the FII GLO due to the uncertainty of the eventual outcome given the
test case has not yet completed nor has Inchcape’s specific claim been heard by the Courts.
Other matter
While this does not represent a contingent liability, we note that a class action has been brought against our subsidiary, Subaru
(Australia) Pty Limited, in connection with the global Takata airbag inflator recall. Subaru (Australia) Pty Limited is one of a number
of named defendants and is, along with others, taking steps to defend the action.
31 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
b. Lease commitments
Operating lease commitments – Group as lessee
Future minimum lease payments for short-term leases under non-cancellable operating leases are as follows:
Within one year
2020
£m
12.7
2020
£m
2.8
2019
£m
5.0
2019
£m
3.2
Operating leases – 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
2020
£m
1.9
2.3
–
4.2
2019
£m
3.4
4.9
0.1
8.4
Sub-lease receivables – Group as lessor
The Group has entered into sub-leases for a number of properties and other assets. As the lease term represents a major proportion
of the underlying asset’s useful life, the associated right-of-use asset has been derecognised and replaced with a sub-lease
receivable. Future minimum lease payments receivable under sub-leases, together with the present value of the net minimum lease
payments receivable (included within trade and other receivables), are as follows:
Minimum lease payments receivable:
– Within one year
– Between one and five years
– After five years
Total minimum lease payments receivable
Less: Unearned finance income
Present value of sub-lease receivables
174
174
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
2020
£m
1.9
7.1
11.5
20.5
(4.8)
15.7
2019
£m
0.8
3.5
8.2
12.5
(3.1)
9.4
Notes to the financial statements continued
30 Guarantees and contingencies continued
HMRC was previously granted leave to appeal a number of items at the Supreme Court. The first of these hearings was in February
2020 and the second hearing occurred in December 2020. The judgment for the February hearing was handed on 20 November
2020. HMRC argued that Limitation Act 1980 applies only to mistakes of fact and not to mistakes of law, or alternatively that the Test
Claimants could reasonably have discovered their mistake more than six years before they issued their claims in 2003. On either
approach, a proportion of the claims would be time-barred. The Supreme Court unanimously allowed the appeal but only on the
basis that time limit for the claim begins to run when the claimant discovers their mistake in the sense of recognising that they have
a worthwhile claim. The Supreme Court has therefore returned the test case to the High Court to establish when the claimant could
have reasonably discovered the relevant mistake.
Therefore, resolution of the test case in the FII GLO remains incomplete. As at 31 December 2020, no further receipts have been
recognised in relation to the balance of Inchcape’s claim in the FII GLO due to the uncertainty of the eventual outcome given the
test case has not yet completed nor has Inchcape’s specific claim been heard by the Courts.
While this does not represent a contingent liability, we note that a class action has been brought against our subsidiary, Subaru
(Australia) Pty Limited, in connection with the global Takata airbag inflator recall. Subaru (Australia) Pty Limited is one of a number
of named defendants and is, along with others, taking steps to defend the action.
Other matter
31 Commitments
a. Capital commitments
Contracts placed for future capital expenditure at the balance sheet date but not yet incurred are as follows:
Future minimum lease payments for short-term leases under non-cancellable operating leases are as follows:
Sub-lease receivables – Group as lessor
The Group has entered into sub-leases for a number of properties and other assets. As the lease term represents a major proportion
of the underlying asset’s useful life, the associated right-of-use asset has been derecognised and replaced with a sub-lease
receivable. Future minimum lease payments receivable under sub-leases, together with the present value of the net minimum lease
payments receivable (included within trade and other receivables), are as follows:
Property, plant and equipment
b. Lease commitments
Operating lease commitments – Group as lessee
Within one year
Operating leases – Group as lessor
Within one year
Between one and five years
After five years
Minimum lease payments receivable:
– Within one year
– Between one and five years
– After five years
Total minimum lease payments receivable
Less: Unearned finance income
Present value of sub-lease receivables
174
Inchcape plc Annual Report and Accounts 2020
2020
£m
12.7
2020
£m
2.8
2020
£m
1.9
2.3
–
4.2
2020
£m
1.9
7.1
11.5
20.5
(4.8)
15.7
2019
£m
5.0
2019
£m
3.2
2019
£m
3.4
4.9
0.1
8.4
2019
£m
0.8
3.5
8.2
12.5
(3.1)
9.4
31 Commitments continued
c. Residual value commitments
The Group has entered into agreements with leasing companies and other third parties to repurchase vehicles for a specified value
at a predetermined date as follows:
Vehicles subject to residual value commitments
1. The comparative has been restated to include additional commitments previously undisclosed.
2020
£m
29.0
2019
£m
(Restated)1
34.5
Residual value commitments comprise the total repurchase liability on all vehicles where the Group has a residual value
commitment. These commitments are largely expected to be settled over the next three years. The disposal of the Fleet Solutions
business in the UK has driven the reduction in the Group’s vehicle liabilities and commitments.
Where the repurchase commitment is in respect of a vehicle sold by the Group, the repurchase commitment is included within
‘trade and other payables’. Included within the above are £0.4m (2019 – £0.3m) of residual value commitments that are included
within ‘trade and other payables’.
32 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:
Other income paid to related parties
Transactions
Amounts outstanding
2020
£m
1.2
2019
£m
0.8
2020
£m
–
2019
£m
–
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 (2019 – £nil).
b. Compensation of key management personnel
The remuneration of the Board of Directors and the Executive Committee was as follows:
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:
Wages and salaries
Post-retirement benefits
Compensation for loss of office
Share-based payments
2020
£m
4.9
0.3
0.9
0.5
6.6
2019
£m
5.4
0.6
–
2.2
8.2
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.
33 Foreign currency translation
The main exchange rates used for translation purposes are as follows:
Australian dollar
Chilean peso
Ethiopian birr
Euro
Hong Kong dollar
Russian rouble
Singapore dollar
US dollar
Average rates
Year-end rates
2020
2019
2020
2019
1.87
1,024.20
45.18
1.13
10.01
94.11
1.78
1.29
1.84
908.04
37.39
1.14
10.01
82.96
1.74
1.28
1.78
973.00
52.91
1.12
10.59
101.21
1.81
1.37
1.89
996.59
42.42
1.18
10.34
82.13
1.78
1.33
34 Events after the reporting period
The Group disposed of a Retail business in Luxembourg in January 2021 for £4.7m.
Lenders with total syndicated revolving credit facility commitments of £620m approved a 2nd extension option in February 2021,
resulting in £620m of commitments being further extended to 2026.
Inchcape plc Annual Report and Accounts 2020
175
Inchcape Annual Report and Accounts 2020 175
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Alternative performance measures
Alternative performance measures
The Group assesses its performance using a variety of alternative performance measures which are not defined under International
Financial Reporting Standards. These provide insight into how the Board and Executive Committee monitor the Group’s strategic
and financial performance, and provide useful information on the trends, performance and position of the Group.
The Group’s income statement and segmental analysis identify separately adjusted measures and exceptional items. These
adjusted measures reflect adjustments to IFRS measures. The Directors consider these ‘adjusted’ measures to be an informative
additional measure of the ongoing trading performance of the Group. Adjusted results are stated before exceptional items.
Exceptional items can include gains or losses on the disposal of businesses, restructuring of businesses, acquisition costs, asset
impairments and the tax effects of these items. Exceptional items excluded from adjusted results can evolve from one financial
period to the next depending on the nature of exceptional items or one-off type activities.
Changes to APMs
Net cash is introduced as a measure of the Group’s net indebtedness. It is based on cash and cash equivalents less borrowings
adjusted for the fair value of derivatives that hedge interest rate or currency risk. Organic growth is also introduced and is a
measure of growth in sales in operations that have been open for at least a year at constant foreign exchanges rates. Trading profit
is removed as central costs are now fully allocated to the Group’s reporting segments. Central costs represent the costs of Group
functions and were previously reported separately.
Constant currency
Some comparative performance measures are translated at constant exchange rates, called ‘constant currency’ measures. This
restates the prior period results at a common exchange rate to the current period and therefore excludes the impact of changes in
exchange rates used for translation.
Performance measure
Definition
Why we measure it
Gross profit before
exceptional items
Gross profit before exceptional items.
Refer to the consolidated income statement.
Operating profit before
exceptional items
Operating profit before exceptional items.
Refer to the consolidated income statement.
Operating margin
Operating profit (before exceptional items) divided
by revenue.
Profit before tax &
exceptional items
Exceptional items
Represents the profit made after operating
and interest expense excluding the impact of
exceptional items and before tax is charged. Refer
to consolidated income statement.
Items that are charged or credited in the
consolidated income statement which are material
and non-recurring in nature. Refer to note 2.
Free cash flow
Net cash flows from operating activities, before
exceptional cash flows, less normalised net capital
expenditure and dividends paid to non-controlling
interests. Refer to page 31.
A key metric of the direct profit contribution from
the Group’s revenue streams (e.g. Vehicles
and Aftersales)
A key metric of the Group’s business performance.
A key metric of operational efficiency, ensuring that
we are leveraging global scale to translate sales
growth into profit.
A key driver of delivering sustainable and growing
earnings to shareholders.
The separate reporting of exceptional items helps
provide additional useful information regarding the
Group’s business performance and is consistent with
the way that financial performance is measured by
the Board and the Executive Committee.
A key driver of the Group’s ability to ‘Invest to
Accelerate Growth’ and to make distributions to
shareholders.
Return on capital
employed (ROCE)
Operating profit (before exceptional items) divided
by the average of opening and closing capital
employed, where capital employed is defined as
net assets add net debt / less net funds.
A key measure of Ignite (Invest to Accelerate
Growth), ROCE is a measure of the Group’s ability
to drive better returns for investors on the capital
we invest.
176
176
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Alternative performance measures
Alternative performance measures
The Group assesses its performance using a variety of alternative performance measures which are not defined under International
Financial Reporting Standards. These provide insight into how the Board and Executive Committee monitor the Group’s strategic
and financial performance, and provide useful information on the trends, performance and position of the Group.
The Group’s income statement and segmental analysis identify separately adjusted measures and exceptional items. These
adjusted measures reflect adjustments to IFRS measures. The Directors consider these ‘adjusted’ measures to be an informative
additional measure of the ongoing trading performance of the Group. Adjusted results are stated before exceptional items.
Exceptional items can include gains or losses on the disposal of businesses, restructuring of businesses, acquisition costs, asset
impairments and the tax effects of these items. Exceptional items excluded from adjusted results can evolve from one financial
period to the next depending on the nature of exceptional items or one-off type activities.
Changes to APMs
Net cash is introduced as a measure of the Group’s net indebtedness. It is based on cash and cash equivalents less borrowings
adjusted for the fair value of derivatives that hedge interest rate or currency risk. Organic growth is also introduced and is a
measure of growth in sales in operations that have been open for at least a year at constant foreign exchanges rates. Trading profit
is removed as central costs are now fully allocated to the Group’s reporting segments. Central costs represent the costs of Group
functions and were previously reported separately.
Constant currency
exchange rates used for translation.
Performance measure
Definition
Some comparative performance measures are translated at constant exchange rates, called ‘constant currency’ measures. This
restates the prior period results at a common exchange rate to the current period and therefore excludes the impact of changes in
Why we measure it
and Aftersales)
growth into profit.
Gross profit before
exceptional items
Gross profit before exceptional items.
A key metric of the direct profit contribution from
Refer to the consolidated income statement.
the Group’s revenue streams (e.g. Vehicles
Operating profit before
Operating profit before exceptional items.
A key metric of the Group’s business performance.
exceptional items
Refer to the consolidated income statement.
Operating margin
Operating profit (before exceptional items) divided
A key metric of operational efficiency, ensuring that
by revenue.
we are leveraging global scale to translate sales
Profit before tax &
exceptional items
Represents the profit made after operating
A key driver of delivering sustainable and growing
and interest expense excluding the impact of
earnings to shareholders.
exceptional items and before tax is charged. Refer
to consolidated income statement.
Exceptional items
Items that are charged or credited in the
The separate reporting of exceptional items helps
consolidated income statement which are material
provide additional useful information regarding the
and non-recurring in nature. Refer to note 2.
Group’s business performance and is consistent with
the way that financial performance is measured by
the Board and the Executive Committee.
Free cash flow
Net cash flows from operating activities, before
A key driver of the Group’s ability to ‘Invest to
exceptional cash flows, less normalised net capital
Accelerate Growth’ and to make distributions to
expenditure and dividends paid to non-controlling
shareholders.
interests. Refer to page 31.
Return on capital
Operating profit (before exceptional items) divided
A key measure of Ignite (Invest to Accelerate
employed (ROCE)
by the average of opening and closing capital
Growth), ROCE is a measure of the Group’s ability
employed, where capital employed is defined as
to drive better returns for investors on the capital
net assets add net debt / less net funds.
we invest.
176
Inchcape plc Annual Report and Accounts 2020
Performance measure
Definition
Why we measure it
Net funds / (debt)
Net cash
Net capital
expenditure
Cash and cash equivalents less borrowings and
lease liabilities adjusted for the fair value of
derivatives that hedge interest rate or currency risk
on borrowings. Refer to note 28.
Cash and cash equivalents less borrowings
adjusted for the fair value of derivatives that hedge
interest rate or currency risk on borrowings and
before the incremental impact of IFRS 16 lease
liabilities. Refer to note 28.
Cash outflows from the purchase of property, plant
and equipment and intangible assets less the
proceeds from the disposal of property, plant and
equipment and intangible assets. Refer to page 31.
A measure of the Group’s net indebtedness that
provides an indicator of the overall balance
sheet strength.
A measure of the Group’s net indebtedness that
provides an indicator of the overall balance sheet
strength and is widely used by external parties.
A measure of the net amount invested in
operational facilities in the period.
Constant currency
% change
Presentation of reported results compared to prior
period translated using constant rates of exchange.
A measure of business performance which
excludes the impact of changes in exchange rates
used for translation.
Organic growth
Organic growth is defined as sales growth in
operations that have been open for at least a year
at constant foreign exchange rates.
A measure of business performance which
excludes the impact of acquisition and disposals in
the period.
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 177
177
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
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
Operating profit before exceptional items
Operating exceptional items
Operating (loss) / profit
Share of profit / (loss) after tax of joint ventures and associates
(Loss) / profit before finance and tax
Net finance costs before exceptional items
Exceptional finance costs
(Loss) / profit before tax
Tax before exceptional tax
Exceptional tax
(Loss) / profit after tax
Non-controlling interests
(Loss) / profit for the year
Basic:
– (Loss) / profit before tax
– (Loss) / 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 (debt) / funds
Capital employed
Net (debt) / funds
Net assets
Equity attributable to owners of the parent
Non-controlling interests
Total equity
2020
£m
2019
£m
2018
£m
2017
£m
2016
£m
6,837.8
9,379.7
9,277.0
8,953.3
7,838.4
165.5
(257.1)
(91.6)
–
(91.6)
(36.6)
–
(128.2)
(33.2)
24.2
(137.2)
(2.9)
(140.1)
(128.2)
(35.6)p
128.9
23.6p
6.9p
373.1
75.5
448.6
0.3
448.9
(47.1)
–
401.8
(75.6)
2.5
328.7
(5.8)
322.9
401.8
79.0p
326.3
59.9p
26.8p
398.6
(223.7)
174.9
0.1
175.0
(48.1)
(13.9)
113.0
(79.1)
5.5
39.4
(7.0)
32.4
113.0
7.8p
350.6
63.8p
26.8p
406.6
(12.6)
394.0
–
394.0
(25.0)
–
369.0
(96.1)
2.7
275.6
(7.9)
267.7
369.0
64.6p
381.6
66.7p
26.8p
359.1
(81.6)
277.5
(0.1)
277.4
(9.6)
–
267.8
(88.0)
11.5
191.3
(6.9)
184.4
267.8
43.2p
349.4
59.6p
23.8p
1,502.1
(351.9)
1,150.2
(66.5)
1,083.7
1,773.2
(224.7)
1,548.5
(249.9)
1,298.6
2,056.0
(248.4)
1,807.6
(445.9)
1,361.7
1,641.0
(273.3)
1,367.7
80.2
1,447.9
1,563.4
(227.4)
1,336.0
26.5
1,362.5
1,064.4
19.3
1,083.7
1,278.3
20.3
1,298.6
1,338.4
23.3
1,361.7
1,427.3
20.6
1,447.9
1,343.9
18.6
1,362.5
178
178
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Five year record
Company statement of financial position
As at 31 December 2020
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
Operating profit before exceptional items
Operating exceptional items
Operating (loss) / profit
Share of profit / (loss) after tax of joint ventures and associates
(Loss) / profit before finance and tax
Net finance costs before exceptional items
Exceptional finance costs
(Loss) / profit before tax
Tax before exceptional tax
Exceptional tax
(Loss) / profit after tax
Non-controlling interests
(Loss) / profit for the year
Basic:
– (Loss) / profit before tax
– (Loss) / earnings per share (pence)
Adjusted (before exceptional items):
– Profit before tax
– Earnings per share (pence)
Non-current assets
Capital employed
Net (debt) / funds
Net assets
Equity attributable to owners of the parent
Non-controlling interests
Total equity
2020
£m
2019
£m
2018
£m
2017
£m
2016
£m
6,837.8
9,379.7
9,277.0
8,953.3
7,838.4
165.5
(257.1)
(91.6)
(91.6)
(36.6)
–
–
(128.2)
(33.2)
24.2
(137.2)
(2.9)
(140.1)
(128.2)
(35.6)p
128.9
23.6p
6.9p
373.1
75.5
448.6
0.3
448.9
(47.1)
–
401.8
(75.6)
2.5
328.7
(5.8)
322.9
401.8
79.0p
326.3
59.9p
26.8p
398.6
(223.7)
174.9
0.1
175.0
(48.1)
(13.9)
113.0
(79.1)
5.5
39.4
(7.0)
32.4
113.0
7.8p
350.6
63.8p
26.8p
406.6
(12.6)
394.0
394.0
(25.0)
–
–
369.0
(96.1)
2.7
275.6
(7.9)
267.7
369.0
64.6p
381.6
66.7p
26.8p
359.1
(81.6)
277.5
(0.1)
277.4
(9.6)
–
267.8
(88.0)
11.5
191.3
(6.9)
184.4
267.8
43.2p
349.4
59.6p
23.8p
1,502.1
1,773.2
2,056.0
1,641.0
1,563.4
1,150.2
1,548.5
1,807.6
1,367.7
1,336.0
(66.5)
(249.9)
(445.9)
80.2
26.5
1,083.7
1,298.6
1,361.7
1,447.9
1,362.5
1,064.4
1,278.3
1,338.4
1,427.3
1,343.9
19.3
20.3
23.3
20.6
18.6
1,083.7
1,298.6
1,361.7
1,447.9
1,362.5
Dividends per share – interim paid and final proposed (pence)
Consolidated statement of financial position
Other assets less (liabilities) excluding net (debt) / funds
(351.9)
(224.7)
(248.4)
(273.3)
(227.4)
Non-current assets
Intangible assets
Property, plant and equipment
Investment in subsidiaries
Deferred tax assets
Trade and other receivables – amounts falling due after more than one year
Current assets
Current tax assets
Trade and other receivables – amounts due within one year
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables – amounts falling due within one year
Non-current liabilities
Trade and other payables – amounts falling due after more than one year
Total liabilities
Net assets
Equity
Share capital
Share premium
Capital redemption reserve
Retained earnings
Total shareholders’ funds
Notes
2020
£m
2019
£m
3
4
5
10
6
6
7
8
9
12
8.1
1.5
1,565.7
–
210.5
1,785.8
2.6
6.5
1.1
10.2
1,796.0
8.6
1.5
1,576.9
5.6
210.6
1,803.2
1.9
42.2
2.1
46.2
1,849.4
(22.1)
(22.1)
(22.0)
(22.0)
(974.0)
(974.0)
(996.1)
799.9
(1,104.4)
(1,104.4)
(1,126.4)
723.0
39.4
146.7
141.2
472.6
799.9
40.0
146.7
140.6
395.7
723.0
The Company reported a profit for the financial year ended 31 December 2020 of £105.0m (2019 – a profit of £190.8m). The
financial statements on pages 179 to 196 were approved by the Board of Directors on 24 February 2021 and were signed on its
behalf by:
Duncan Tait,
Group Chief Executive
Registered Number: 609782
Inchcape plc
Gijsbert de Zoeten,
Chief Financial Officer
178
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Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 179
179
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Company statement of changes in equity
For the year ended 31 December 2020
At 1 January 2019
Profit for the year
Total comprehensive income for the year
Dividends
Share buyback programme
Net purchase of own shares by the Inchcape
Employee Trust
Share-based payments, net of tax
At 1 January 2020
Profit for the year
Total comprehensive income for the year
Dividends
Share buyback programme
Net purchase of own shares by the Inchcape
Employee Trust
Share-based payments, net of tax
At 31 December 2020
Notes
Share capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Total
£m
41.6
146.7
139.0
418.6
745.9
13
12
13
12
–
–
–
(1.6)
–
–
40.0
–
–
–
(0.6)
–
–
39.4
–
–
–
–
–
–
–
1.6
190.8
190.8
190.8
190.8
(110.5)
(100.0)
(110.5)
(100.0)
–
–
146.7
–
–
140.6
(9.3)
6.1
395.7
(9.3)
6.1
723.0
–
–
–
–
–
–
–
0.6
105.0
105.0
105.0
105.0
–
(31.4)
–
(31.4)
–
–
146.7
–
–
141.2
–
3.3
472.6
–
3.3
799.9
Share-based payments include a net tax charge of £nil (2019 – £nil).
180
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Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Company statement of changes in equity
For the year ended 31 December 2020
Accounting policies
At 1 January 2019
Profit for the year
Total comprehensive income for the year
Dividends
Share buyback programme
Net purchase of own shares by the Inchcape
Employee Trust
Share-based payments, net of tax
At 1 January 2020
Profit for the year
Total comprehensive income for the year
Dividends
Share buyback programme
Net purchase of own shares by the Inchcape
Employee Trust
Share-based payments, net of tax
At 31 December 2020
Share-based payments include a net tax charge of £nil (2019 – £nil).
Notes
Share capital
premium
£m
41.6
£m
146.7
Share
redemption
Capital
reserve
£m
139.0
Retained
earnings
£m
Total
£m
418.6
745.9
13
12
(1.6)
(110.5)
(100.0)
(110.5)
(100.0)
1.6
40.0
146.7
140.6
395.7
723.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
190.8
190.8
190.8
190.8
(9.3)
6.1
(9.3)
6.1
105.0
105.0
105.0
105.0
–
–
–
3.3
–
3.3
13
12
(0.6)
0.6
(31.4)
(31.4)
General information
These financial statements are prepared for Inchcape plc (the Company) for the year ended 31 December 2020. The Company is
the ultimate parent entity of the Inchcape Group (the Group) and acts as the holding company of the Group.
Basis of preparation
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework
(FRS 101).
The financial statements are prepared under the historical cost convention in accordance with the Companies Act 2006. As permitted
by Section 408 of the Companies Act 2006, no separate profit and loss account or statement of comprehensive income is presented
for the Company.
The Company does not have any critical accounting judgements. The valuation of the Company’s investments is a key source of
estimation uncertainty. The Company’s net assets were lower than its market capitalisation on 31 December 2020 and the
estimates of the recoverable amounts of the individual investments were in excess of their carrying values. As a result, no
impairment has been reflected. Other sources of estimation uncertainty most applicable to the Company do not give rise to a
significant risk of material adjustment to the carrying value of the Company’s assets and liabilities.
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 41 to 50.
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)
39.4
146.7
141.2
472.6
799.9
– 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.
180
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Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 181
181
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Accounting policies continued
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, as described in
the Directors’ Report of the consolidated Group Financial Statements.
Foreign currencies
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 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, calculated
using the effective interest rate method, in the period in which they are incurred.
Investments
Investments in subsidiaries are stated at cost, less provisions for impairment.
Impairment
The Company’s accounting policies in respect of impairment of property, plant and equipment, intangible assets and financial
assets are consistent with those of the Group. The carrying values of investments in subsidiary undertakings are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable
amount is estimated.
The Company’s impairment policies in relation to financial assets are consistent with those of the Group, with additional
consideration given to amounts owed by Group undertakings. Any provision for impairment of receivables is based on lifetime
expected credit losses. Lifetime expected credit losses are calculated by assessing historic credit loss experience, adjusted for
factors specific to the receivable and company.
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 between five and eight years.
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 provided on
a straight-line basis to allocate the cost of the asset over its estimated useful life, which in the case of computer hardware is five years.
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.
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, 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.
182
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Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Accounting policies continued
Going concern
Foreign currencies
Finance costs
Investments
Impairment
amount is estimated.
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, as described in
the Directors’ Report of the consolidated Group Financial Statements.
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 in foreign currencies are translated into Sterling at closing rates of exchange
and differences are taken to the income statement.
Finance costs consist of interest payable on the Private Placement borrowing. Costs are recognised as an expense, calculated
using the effective interest rate method, in the period in which they are incurred.
Investments in subsidiaries are stated at cost, less provisions for impairment.
The Company’s accounting policies in respect of impairment of property, plant and equipment, intangible assets and financial
assets are consistent with those of the Group. The carrying values of investments in subsidiary undertakings are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable
The Company’s impairment policies in relation to financial assets are consistent with those of the Group, with additional
consideration given to amounts owed by Group undertakings. Any provision for impairment of receivables is based on lifetime
expected credit losses. Lifetime expected credit losses are calculated by assessing historic credit loss experience, adjusted for
factors specific to the receivable and company.
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 between five and eight years.
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 provided on
a straight-line basis to allocate the cost of the asset over its estimated useful life, which in the case of computer hardware is five years.
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.
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, 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.
balances net.
Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle
182
Inchcape plc Annual Report and Accounts 2020
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 credit 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.
The issue of shares by the Company to employees of its subsidiaries represents additional capital contributions. When these costs
are recharged to the subsidiary undertaking, the investment balance is reduced accordingly.
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 117 to 126.
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 183
183
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements
1 Auditor’s remuneration
The Company incurred £0.1m (2019 – £0.1m) in relation to UK statutory audit fees for the year ended 31 December 2020.
2 Directors’ remuneration
Wages and salaries
Social security costs
Pension costs
2020
£m
1.4
0.2
0.2
1.8
2019
£m
2.1
0.2
0.3
2.6
Further information on Executive Directors’ emoluments and interests is given in the Directors’ Report on Remuneration which can be
found on pages 74 to 95.
3
Intangible assets
Cost
At 1 January 2020
Additions
At 31 December 2020
Accumulated amortisation and impairment
At 1 January 2020
Amortisation charge for the year
At 31 December 2020
Net book value at 31 December 2020
Net book value at 31 December 2019
At 31 December 2020, assets under construction total £4.9m (2019 – £3.9m).
4 Property, plant and equipment
Cost
At 1 January 2020 and at 31 December 2020
Accumulated depreciation and impairment
At 1 January 2020 and at 31 December 2020
Net book value at 31 December 2020
Net book value at 31 December 2019
Computer
software
£m
28.9
1.0
29.9
(20.3)
(1.5)
(21.8)
8.1
8.6
Plant,
machinery
and
equipment
£m
1.8
(0.3)
1.5
1.5
184
184
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
The Company incurred £0.1m (2019 – £0.1m) in relation to UK statutory audit fees for the year ended 31 December 2020.
5
Investment in subsidiaries
Further information on Executive Directors’ emoluments and interests is given in the Directors’ Report on Remuneration which can be
Cost
At 1 January
Additions
Disposals
At 31 December
Provisions
At 1 January
Disposals
At 31 December
Net book value
2020
£m
2019
£m
1,711.0
17.4
(32.4)
1,696.0
(134.1)
3.8
(130.3)
1,565.7
1,711.0
–
–
1,711.0
(134.1)
–
(134.1)
1,576.9
The Directors believe that the carrying value of the individual investments is supported by their underlying net assets.
During the year, as part of a Group-wide reorganisation, the Company contributed its investment in Inchcape Latvia Limited to
Inchcape International Holdings Limited in return for an issue of shares and SS Acquisition Corporation repurchased 12.3% of its
outstanding share capital which was held by the Company.
6 Trade and other receivables
Amounts due within one year
Amounts owed by Group undertakings
Other debtors
Amounts due after more than one year
Amounts owed by Group undertakings
Other debtors
2020
£m
6.2
0.3
6.5
210.0
0.5
210.5
2019
£m
42.1
0.1
42.2
210.0
0.6
210.6
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.
7 Cash and cash equivalents
Cash and cash equivalents
8 Trade and other payables – amounts falling due within one year
Amounts owed to Group undertakings
Other creditors
Amounts owed to Group undertakings are interest free and repayable on demand.
2020
£m
1.1
2020
£m
17.5
4.6
22.1
2019
£m
2.1
2019
£m
17.5
4.5
22.0
Notes to the financial statements
1 Auditor’s remuneration
2 Directors’ remuneration
Wages and salaries
Social security costs
Pension costs
found on pages 74 to 95.
3
Intangible assets
Cost
At 1 January 2020
Additions
At 31 December 2020
Accumulated amortisation and impairment
At 1 January 2020
Amortisation charge for the year
At 31 December 2020
Net book value at 31 December 2020
Net book value at 31 December 2019
At 31 December 2020, assets under construction total £4.9m (2019 – £3.9m).
4 Property, plant and equipment
Cost
At 1 January 2020 and at 31 December 2020
Accumulated depreciation and impairment
At 1 January 2020 and at 31 December 2020
Net book value at 31 December 2020
Net book value at 31 December 2019
184
Inchcape plc Annual Report and Accounts 2020
2020
£m
1.4
0.2
0.2
1.8
2019
£m
2.1
0.2
0.3
2.6
Computer
software
£m
28.9
1.0
29.9
(20.3)
(1.5)
(21.8)
8.1
8.6
Plant,
machinery
equipment
and
£m
1.8
(0.3)
1.5
1.5
Inchcape plc Annual Report and Accounts 2020
185
Inchcape Annual Report and Accounts 2020 185
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
9 Trade and other payables – amounts falling due after more than one year
Amounts owed to Group undertakings
Private Placement
2020
£m
764.0
210.0
974.0
2019
£m
894.4
210.0
1,104.4
Amounts owed to Group undertakings are repayable between one and five years and bear interest at rates linked to source
currency base rates.
In December 2016, the Group concluded a Private Placement transaction raising £210m to refinance existing US dollar Private
Placement borrowings which matured in May 2017. The amounts drawn under these facilities are as follows:
Maturity date
Amount drawn
Fixed rate coupon
10 Deferred tax
Net deferred tax asset / (liabilities)
At 1 January 2019
Credited / (Charged) to the income statement
At 31 December 2019
(Charged) / credited to the income statement
At 31 December 2020
May 2024
£70m
2.85%
May 2027
£30m
3.02%
May 2027
£70m
3.12%
May 2029
£40m
3.10%
Accelerated
tax
depreciation
Tax losses
£m
0.8
3.0
3.8
(3.8)
–
£m
(0.1)
(0.1)
(0.2)
0.2
–
Other timing
differences
£m
0.4
1.6
2.0
(2.0)
–
Total
£m
1.1
4.5
5.6
(5.6)
–
Deferred tax assets recognised are supported by future taxable profits of the UK tax group, headed by the Company, which are
considered probable.
11 Guarantees
The Company is party to composite cross guarantees between banks and its subsidiaries. The Company’s exposure under these
guarantees at 31 December 2020 was £1.1m (2019 – £2.1m), equal to the carrying value of its cash and cash equivalents at the
end of the period (see note 7).
In addition, the Company has given performance guarantees in the normal course of business in respect of the obligations of
Group undertakings amounting to £293.1m (2019 – £94.7m).
12 Share capital
a. Allotted, called up and fully paid up
Issued and fully paid ordinary shares (nominal value of 10.0p each)
At 1 January
Allotted under share option schemes
Cancelled under share buyback
At 31 December
2020
Number
2019
Number
399,132,736
–
(5,858,343)
393,274,393
415,127,453
75,353
(16,070,070)
399,132,736
2020
£m
40.0
–
(0.6)
39.4
2019
£m
41.6
–
(1.6)
40.0
b. Share buyback programme
During 2020, the Company repurchased 5,858,343 (2019 – 16,070,070) of its own shares through purchases on the London Stock
Exchange, at a cost of £29.8m (2019 – £98.5m). The shares repurchased during the year were cancelled, with none held within
treasury shares at the end of the reporting period. An amount of £0.6m (2019 – 1.6m), equivalent to the nominal value of the
cancelled shares, has been transferred to the capital redemption reserve. Costs of £1.6m (2019 – £1.5m) associated with the
transfer to the Company of the repurchased shares and their subsequent cancellation have been charged to the profit and loss
reserve.
During the year, the Group had a contract in place with a broker to purchase its own shares for cash in connection with the £150m
buyback announced on 27 February 2020. On 20 March 2020, given the uncertainty around the COVID-19 pandemic, the Group
served notice to its broker to terminate the buyback effective 24 March 2020.
c. Substantial shareholdings
Details of substantial interests in the Company’s issued ordinary share capital received by the Company at 24 February 2021
under the provisions of the Companies Act 2006 have been disclosed in the significant shareholdings section of the Corporate
Governance Report.
186
186
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Notes to the financial statements continued
9 Trade and other payables – amounts falling due after more than one year
2020
£m
764.0
210.0
974.0
2019
£m
894.4
210.0
1,104.4
Accelerated
Tax losses
depreciation
Other timing
differences
tax
£m
(0.1)
(0.1)
(0.2)
0.2
–
£m
0.8
3.0
3.8
(3.8)
–
£m
0.4
1.6
2.0
(2.0)
–
Total
£m
1.1
4.5
5.6
(5.6)
–
Amounts owed to Group undertakings are repayable between one and five years and bear interest at rates linked to source
In December 2016, the Group concluded a Private Placement transaction raising £210m to refinance existing US dollar Private
Placement borrowings which matured in May 2017. The amounts drawn under these facilities are as follows:
May 2024
May 2027
May 2027
May 2029
£70m
2.85%
£30m
3.02%
£70m
3.12%
£40m
3.10%
Amounts owed to Group undertakings
Private Placement
currency base rates.
Maturity date
Amount drawn
Fixed rate coupon
10 Deferred tax
Net deferred tax asset / (liabilities)
At 1 January 2019
Credited / (Charged) to the income statement
(Charged) / credited to the income statement
At 31 December 2019
At 31 December 2020
considered probable.
11 Guarantees
end of the period (see note 7).
12 Share capital
a. Allotted, called up and fully paid up
At 1 January
Allotted under share option schemes
Cancelled under share buyback
At 31 December
b. Share buyback programme
Deferred tax assets recognised are supported by future taxable profits of the UK tax group, headed by the Company, which are
The Company is party to composite cross guarantees between banks and its subsidiaries. The Company’s exposure under these
guarantees at 31 December 2020 was £1.1m (2019 – £2.1m), equal to the carrying value of its cash and cash equivalents at the
In addition, the Company has given performance guarantees in the normal course of business in respect of the obligations of
Group undertakings amounting to £293.1m (2019 – £94.7m).
Issued and fully paid ordinary shares (nominal value of 10.0p each)
2020
Number
2019
Number
399,132,736
415,127,453
–
75,353
(5,858,343)
(16,070,070)
393,274,393
399,132,736
2020
£m
40.0
–
(0.6)
39.4
2019
£m
41.6
–
(1.6)
40.0
During 2020, the Company repurchased 5,858,343 (2019 – 16,070,070) of its own shares through purchases on the London Stock
Exchange, at a cost of £29.8m (2019 – £98.5m). The shares repurchased during the year were cancelled, with none held within
treasury shares at the end of the reporting period. An amount of £0.6m (2019 – 1.6m), equivalent to the nominal value of the
cancelled shares, has been transferred to the capital redemption reserve. Costs of £1.6m (2019 – £1.5m) associated with the
transfer to the Company of the repurchased shares and their subsequent cancellation have been charged to the profit and loss
reserve.
During the year, the Group had a contract in place with a broker to purchase its own shares for cash in connection with the £150m
buyback announced on 27 February 2020. On 20 March 2020, given the uncertainty around the COVID-19 pandemic, the Group
served notice to its broker to terminate the buyback effective 24 March 2020.
c. Substantial shareholdings
Governance Report.
Details of substantial interests in the Company’s issued ordinary share capital received by the Company at 24 February 2021
under the provisions of the Companies Act 2006 have been disclosed in the significant shareholdings section of the Corporate
186
Inchcape plc Annual Report and Accounts 2020
12 Share capital continued
d. Share options
At 31 December 2020, 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
The Inchcape SAYE Share Option Scheme
– approved
124,733
348,618
625,032
1,686,385
Exercisable until
1 May 2021
1 May 2022
1 May 2023
1 May 2024
Option price
(£)
6.66
5.54
4.59
3.77
Included within the retained earnings reserve are 167,312 (2019 – 861,589) 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 2020 was £1.0m (2019 – £5.5m). The market value of these shares at both
31 December 2020 and 24 February 2021 was £1.1m and £1.2m respectively (31 December 2019 – £6.1m, 27 February 2019 – £5.1m).
e. Share-based remuneration
Inchcape plc has two employees, the Group Chief Executive and the Chief Financial Officer.
The terms and conditions of the Company’s share-based payment plans are detailed in the Directors’ Report on Remuneration.
The credit arising from share-based transactions during the year was £0.3m (2019 – charge of £0.6m), all of which is equity-settled.
The weighted average exercise price of shares exercised during the period was £0.10 (2019 – £0.10).
The weighted average remaining contractual life for the share options outstanding at 31 December 2020 is 3.3 years (2019 – 2.3
years) and the exercise price for options outstanding at the end of the year was £3.77 (2019 – £5.54).
13 Dividends
The following dividends were paid by the Company:
Interim dividend for the six months ended 30 June 2020 of nil pence per share
(30 June 2019 of 8.9p per share)
Final dividend for the year ended 31 December 2019 of nil pence per share
(31 December 2018 of 17.9p per share)
2020
£m
–
–
–
2019
£m
36.3
74.2
110.5
The Board previously recommended a final ordinary dividend for the year ended 31 December 2019 of 17.9p per ordinary share
(2018: 17.9p). The dividend was due to be paid on 19 June 2020. As announced on 7 April 2020, given the impact of COVID-19, the
Group decided to preserve cash and no longer recommend the payment of the previously announced final ordinary dividend.
A final proposed dividend for the year ended 31 December 2020 of 6.9p per share amounting to £27.2m is subject to approval by
shareholders at the Annual General Meeting and has not been included as a liability as at 31 December 2020.
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 187
187
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
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 2020 is shown below:
Subsidiaries
Name and registered address
Argentina
Torre Catalinas Plaza, Av. Eduardo Madero 900 Piso 17, Buenos Aires
Distribuidora Automotriz Argentina SA
Inchcape Argentina SA
Australia
Level 2, 4 Burbank Place, Baulkham Hills, NSW 2153
AutoNexus Pty Ltd
Bespoke Automotive Australia Pty Ltd
Inchcape Australia Ltd
Trivett Automotive Retail Pty Ltd
Inchcape European Automotive Pty Ltd
SMLB Pty Ltd
Subaru (Aust) Pty 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
Inchcape Finance Australia Pty Limited
Inchcape Corporate Services Australia Pty Limited
Belgium
Leuvensesteenweg 369, 1932 Sint-Stevens-Woluwe
Autoproducts NV
Car Security NV
Toyota Belgium NV/SA
Boulevard Industriel 198, 1070 Anderlecht
Garage Francorchamps SA
Inchcape Retail Belgium
Brunei
KM3.6, Jalan Gadong, Bandar Seri Begawan
Champion Motors (Brunei) Sdn Bhd
NBT (Brunei) Sdn Bhd
NBT Services Sdn Bhd
Bulgaria
163 Tsarigradsko Shosse Str, Sofia
Inchcape Brokerage Bulgaria EOOD
TM Auto EOOD
Toyota Balkans EOOD
188
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Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
(i)
(ii)
(iii)
(iv)
Percentage
owned
100%
100%
100%
100%
100%
100%
100%
100%
90%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
70%
70%
70%
100%
100%
100%
Notes to the financial statements continued
In accordance with Section 409 of the Companies Act 2006 a full list of subsidiaries, associates and joint ventures as at
Torre Catalinas Plaza, Av. Eduardo Madero 900 Piso 17, Buenos Aires
Australia
Level 2, 4 Burbank Place, Baulkham Hills, NSW 2153
14 Related undertakings
31 December 2020 is shown below:
Subsidiaries
Name and registered address
Argentina
Distribuidora Automotriz Argentina SA
Inchcape Argentina SA
AutoNexus Pty Ltd
Bespoke Automotive Australia Pty Ltd
Inchcape Australia Ltd
Trivett Automotive Retail Pty Ltd
Inchcape European Automotive Pty Ltd
SMLB Pty Ltd
Subaru (Aust) Pty 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
Inchcape Finance Australia Pty Limited
Inchcape Corporate Services Australia Pty Limited
Leuvensesteenweg 369, 1932 Sint-Stevens-Woluwe
Belgium
Autoproducts NV
Car Security NV
Toyota Belgium NV/SA
Boulevard Industriel 198, 1070 Anderlecht
Garage Francorchamps SA
Inchcape Retail Belgium
Brunei
KM3.6, Jalan Gadong, Bandar Seri Begawan
Champion Motors (Brunei) Sdn Bhd
NBT (Brunei) Sdn Bhd
NBT Services Sdn Bhd
Bulgaria
163 Tsarigradsko Shosse Str, Sofia
Inchcape Brokerage Bulgaria EOOD
TM Auto EOOD
Toyota Balkans EOOD
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Inchcape plc Annual Report and Accounts 2020
14 Related undertakings continued
Name and registered address
Chile
Av. La Dehesa 265, Santiago, Región Metropolitana
Mobility Services Chile SpA
Universal Motors SpA
Williamson Balfour Motors SpA
Williamson Balfour SA
Ruta 5 Norte #19100 Ciudad Santiago comuna Lampa Región Metropolitana
Hino Chile SA
Inchcape Camiones y Buses Chile SA
Avda. las Condes 11774, Vitacura, Santiago
Inchcape Latam Internacional SA
Inchcape Automotriz Chile SA
Indigo Chile Holdings SpA
Av vitacura #5410, Vitacura, Santiago
Inchcape Commercial Chile SA
Colombia
Calle 99 N° 69c - 41 Bogotá
Inchcape Inversiones Colombia S.A.S
Impoquing Motor SAS
Matrase SAS
Praco Didacol SAS
Inmobiliaria Inchcape Colombia S.A.S
Aut. Medellín Calle 80 Km 7 Parque Industrial Celta Trade Park Bodega 1202 Funza
Distribuidora Hino de Colombia SAS
Cook Islands
First Floor, BCI House, Avarua, Rarotonga
IB Enterprises Ltd
Costa Rica
La Uruca, de la Pozuelo 200 metros oeste, frente al Hospital Mexico
Arienda Express SA
Comericio de las Americas SA
Inchcape Protection Express
Vehiculos de Trabajo SA
Vistas de Guanacaste Orquideas SA
Djibouti
Route de Venise – Djibouti Free Zone – LOB 124, PO Box 2645
Red Sea Automotive FZCO
Percentage
owned
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
(i)
(ii)
(iii)
(iv)
Percentage
owned
100%
100%
100%
100%
100%
100%
100%
100%
90%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
70%
70%
70%
100%
100%
100%
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 189
189
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
14 Related undertakings continued
Name and registered address
Ecuador
Av. Galo Plaza Lasso n. 5898. Quito, 170513
Autolider Ecuador S.A.
El Salvador
Boulevard Luis Poma y Calle Llama del Bosque Pte. #1, Urb. Madreselva, Antiguo Cuscatlán, La Libertad
Inchcape El Salvador, S.A. de C.V.
Estonia
Läike tee 38, Peetri küla, Rae vald, Harjumaa 75312
Inchcape Motors Estonia OÜ
Ethiopia
Bole Sub City, Kebele 03, H.Nr. 2441, Addis Ababa
The Motor & Engineering Company Of Ethiopia (Moenco) S.C.
Finland
Ansatie 6 a C, 01740 Vantaa, Kotipaikka, Helsinki
Inchcape Motors Finland Oy
Inchcape JLR Finland Oy
Greece
48 Ethnikis Antistaseos Street, Halandri 15231
British Providence SA
Eurolease Fleet Services SA
Toyota Hellas SA
Polis Inchcape Athens SA
11th Km, National Road Thessaloniki-Airport, Thessaloniki 60371
Polis Inchcape Thessaloniki SA
Guam
443 South Marine Corps Drive, Tamuning, Guam 96913
Atkins Kroll Inc
Guatemala
14 Avenida 18-37 zona 13, Guatemala, Guatemala
Inchcape Guatemala SA
Honduras
Penthouse Tower Building Mayab, Colonia Loas del Mayab, Avenida Republica de Costa Rica, Tegucigalpa
Inchcape Honduras S.A.
Hong Kong
11/F, Tower B, Manulife Financial Centre, 223-231 Wai Yip Street, Kwun Tong, Kowloon, HK
British Motors Ltd
Crown Motors Ltd
Future Motors Ltd
Inchcape Finance (HK) Ltd
Inchcape Hong Kong Ltd
Inchcape Mobility Limited
Inchcape Motor Services Ltd
Mega EV Ltd
Nova Motors Ltd
190
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Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Percentage
owned
100%
100%
100%
94%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Boulevard Luis Poma y Calle Llama del Bosque Pte. #1, Urb. Madreselva, Antiguo Cuscatlán, La Libertad
Notes to the financial statements continued
14 Related undertakings continued
Name and registered address
Ecuador
Av. Galo Plaza Lasso n. 5898. Quito, 170513
Autolider Ecuador S.A.
El Salvador
Inchcape El Salvador, S.A. de C.V.
Estonia
Ethiopia
Finland
Greece
Läike tee 38, Peetri küla, Rae vald, Harjumaa 75312
Inchcape Motors Estonia OÜ
Bole Sub City, Kebele 03, H.Nr. 2441, Addis Ababa
The Motor & Engineering Company Of Ethiopia (Moenco) S.C.
Ansatie 6 a C, 01740 Vantaa, Kotipaikka, Helsinki
Inchcape Motors Finland Oy
Inchcape JLR Finland Oy
48 Ethnikis Antistaseos Street, Halandri 15231
British Providence SA
Eurolease Fleet Services SA
Toyota Hellas SA
Polis Inchcape Athens SA
11th Km, National Road Thessaloniki-Airport, Thessaloniki 60371
Polis Inchcape Thessaloniki SA
443 South Marine Corps Drive, Tamuning, Guam 96913
Guam
Atkins Kroll Inc
Guatemala
14 Avenida 18-37 zona 13, Guatemala, Guatemala
Inchcape Guatemala SA
Honduras
Inchcape Honduras S.A.
Hong Kong
British Motors Ltd
Crown Motors Ltd
Future Motors Ltd
Inchcape Finance (HK) Ltd
Inchcape Hong Kong Ltd
Inchcape Mobility Limited
Inchcape Motor Services Ltd
Mega EV Ltd
Nova Motors Ltd
190
Inchcape plc Annual Report and Accounts 2020
Penthouse Tower Building Mayab, Colonia Loas del Mayab, Avenida Republica de Costa Rica, Tegucigalpa
11/F, Tower B, Manulife Financial Centre, 223-231 Wai Yip Street, Kwun Tong, Kowloon, HK
Percentage
owned
100%
100%
100%
94%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
14 Related undertakings continued
Name and registered address
Ireland
17 Corrig Road, Sandyford, Dublin 18, D18 N6K8
Inchcape Finance (Ireland) Ltd
Ivory Coast
01 BP 3893, Abidjan O1
Distribution Services Cote d’Ivoire SA
Toyota Services Afrique SA
Kenya
LR 1870/X/126, Ground Floor, Oracle Towers, Waiyaki Way, P.O. Box 2231-00606, Nairobi
Inchcape Kenya Ltd
Latvia
4a Skanstes Street, Riga, LV-1013
Baltic Motors Imports SIA
Inchcape Motors Latvia SIA
Inchcape JLR Baltics
Lithuania
Laisves av. 137, Vilnius, LT-06118
UAB Autovista
UAB Autovytaras
UAB Inchcape Motors
Ozo str. 10A, Vilnius, LT-08200
UAB Krasta Auto
Svajonės str. 40, Klaipėda, LT-94101
UAB Krasta Auto Klaipeda
Veiverių str. 150, Kaunas, LT-46391
UAB Krasta Auto Kaunas
Luxembourg
6 ZAI Bourmicht L-8070, Bertrange
Grand Garage de Luxembourg
Percentage
owned
(v)
100%
(viii)
100%
100%
100%
100%
60%
100%
67%
67%
67%
100%
100%
100%
100%
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 191
191
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
14 Related undertakings continued
Name and registered address
Macau
Avenida do Coronel Mesquita, No 48-48D, Edf. Industrial Man Kei R/C, Macau
Nova Motors (Macao) Ltd
Yat Fung Motors Ltd
Macedonia
21 8th September Boulevard, 1000 Skopje
Toyota Auto Center DOOEL
Netherlands
Gustav Mahlerlaan 1212, 1081 LA Amsterdam, the Netherlands
Inchcape International Group BV
New Zealand
Bell Gully, Level 22, Vero Centre, 48 Shortland Street, Auckland, 1010 , New Zealand
Inchcape Motors NZ Ltd
Panama
Vía General Nicanor A. de Obarrio (Street 50), Plaza Bancomer
lIaother SA
Ilachile SA
Ciudad de Panamá, Vía Cincuentenario Andrés Mojica, Ave. 6ta B., Lote X 5B,
Corregimiento de San Francisco, Distrito de Panamá, Provincia de Panamá
Arrendadora Automotriz SA
Bielesfield Corp
Edenborn Trading Inc
Goltex Commerce Inc
Inmuebles Comerciales SA
Iron Crag Corporation
Motors Japoneses SA
Sun Motors SA
Peru
Av. El Polo Nro. 1117, Santiago de Surco, Lima
Inchcape Motors Peru SA
Av. Republica de Panama Nro. 3330, San Isidro, Lima
IMP Distribuidora SA
Av. Morro Solar 812, Santiago de Surco, Lima
Autocar del Peru SA
Distribuidora Automotriz del Peru SA
Inchcape Latam Peru SA
Rentas e Inmobiliaria Sur Andina SA
Poland
Al. Prymasa Tysiąclecia 64, 01-424 Warszawa
Inchcape Motors Polska Sp z.o.o
Inchcape JLR Poland Sp. Z.o.o
Al. Karkonoska 61, 53-015 Wroclaw
Interim Cars Sp z.o.o
192
192
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Percentage
owned
100%
100%
100%
(i)
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Notes to the financial statements continued
Avenida do Coronel Mesquita, No 48-48D, Edf. Industrial Man Kei R/C, Macau
14 Related undertakings continued
Name and registered address
Macau
Nova Motors (Macao) Ltd
Yat Fung Motors Ltd
Macedonia
21 8th September Boulevard, 1000 Skopje
Toyota Auto Center DOOEL
Netherlands
Gustav Mahlerlaan 1212, 1081 LA Amsterdam, the Netherlands
Inchcape International Group BV
Vía General Nicanor A. de Obarrio (Street 50), Plaza Bancomer
Ciudad de Panamá, Vía Cincuentenario Andrés Mojica, Ave. 6ta B., Lote X 5B,
Corregimiento de San Francisco, Distrito de Panamá, Provincia de Panamá
New Zealand
Inchcape Motors NZ Ltd
Panama
lIaother SA
Ilachile SA
Arrendadora Automotriz SA
Bielesfield Corp
Edenborn Trading Inc
Goltex Commerce Inc
Inmuebles Comerciales SA
Iron Crag Corporation
Motors Japoneses SA
Sun Motors SA
Peru
Av. El Polo Nro. 1117, Santiago de Surco, Lima
Inchcape Motors Peru SA
Av. Republica de Panama Nro. 3330, San Isidro, Lima
IMP Distribuidora SA
Av. Morro Solar 812, Santiago de Surco, Lima
Autocar del Peru SA
Distribuidora Automotriz del Peru SA
Inchcape Latam Peru SA
Rentas e Inmobiliaria Sur Andina SA
Poland
Al. Prymasa Tysiąclecia 64, 01-424 Warszawa
Inchcape Motors Polska Sp z.o.o
Inchcape JLR Poland Sp. Z.o.o
Al. Karkonoska 61, 53-015 Wroclaw
Interim Cars Sp z.o.o
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Inchcape plc Annual Report and Accounts 2020
Percentage
owned
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
14 Related undertakings continued
Name and registered address
Romania
Pipera Boulevard No 1, Voluntari, Ilfov, 077190
Inchcape Motors Srl
Inchcape Real Estate Srl
Toyota Romania Srl
Russia
Building 1, 18 2-ya Magistralnaya street, Moscow 123290
LLC Inchcape Management Services Rus
LLC Inchcape Holding
Bell Gully, Level 22, Vero Centre, 48 Shortland Street, Auckland, 1010 , New Zealand
108811, Moscow, settlement Moskovskiy, block No34, property 2, bld. 1
LLC Inchcape T
(i)
100%
31 Litera A, Rustaveli Street, St Petersburg 195273
LLC Inchcape Olimp
10 Seslavinskaya Street, Moscow 121309
LLC Autoproject
36 Yaroslavskoe Shosse, Moscow 129337
LLC Borishof 1
195273, Saint-Petersburg, Rustaveli str., 31, Lit.A, apt.3
LLC Concord
Building 22, 18 2-ya Magistralnaya Street, Moscow 123290
LLC Musa Motors JLR
LLC Musa Motors Volvo
41 ul. Kuznetsovskaya, St Petersburg 196105
LLC Orgtekhstroy
Saipan
San Jose Village, 1 Chalan Monsignor Guerrero, Saipan, 96950, Northern Mariana Islands
Atkins Kroll (Saipan) Inc
Singapore
2 Pandan Crescent, Inchcape Centre, Singapore 128462
Borneo Motors (Singapore) Pte Ltd
Century Motors (Singapore) Pte Ltd
Champion Motors (1975) Pte Ltd
Inchcape Automotive Services Pte Ltd
Inchcape Motors Private Ltd
Spain
C. Prim, 19, 28004 Madrid
Inchcape Inversiones España SLu
Thailand
No. 4332 Rama IV Road, Prakhanong Sub-District, Klongtoey District, Bangkok
Inchcape (Thailand) Company Ltd
Inchcape Services (Thailand) Co Ltd
Percentage
owned
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 193
193
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
14 Related undertakings continued
Name and registered address
United Kingdom
Inchcape Retail, First Floor, Unit 3140 Park Square, Solihull Parkway, Birmingham B37 7YN
Armstrong Massey (York) Ltd
Armstrong Massey Holdings Ltd
Autobytel Ltd
Automobiles of Distinction Ltd
Bates Motors (Belcher) Ltd
Casemount Holdings Ltd
Castle Motors (York) 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 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 Motors International Ltd
Inchcape Motors Pension Trust Ltd
Inchcape Midlands Ltd
Inchcape North West Group Ltd
Inchcape North West Ltd
Inchcape Park Lane Ltd
Inchcape Retail Ltd
Inchcape Trade Parts Ltd
Inchcape Transition Ltd
Inchcape UK Ltd
Inchcape UK Corporate Management Ltd
James Edwards (Chester) Ltd
Inchcape KMG 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
194
194
Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
Percentage
owned
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)
(vii)
Notes to the financial statements continued
Inchcape Retail, First Floor, Unit 3140 Park Square, Solihull Parkway, Birmingham B37 7YN
14 Related undertakings continued
Name and registered address
United Kingdom
Armstrong Massey (York) Ltd
Armstrong Massey Holdings Ltd
Autobytel Ltd
Automobiles of Distinction Ltd
Bates Motors (Belcher) Ltd
Casemount Holdings Ltd
Castle Motors (York) 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 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 Motors International Ltd
Inchcape Motors Pension Trust Ltd
Inchcape Midlands Ltd
Inchcape North West Group Ltd
Inchcape North West Ltd
Inchcape Park Lane Ltd
Inchcape Retail Ltd
Inchcape Trade Parts Ltd
Inchcape Transition Ltd
Inchcape UK Ltd
Inchcape UK Corporate Management Ltd
James Edwards (Chester) Ltd
Inchcape KMG 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
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Inchcape plc Annual Report and Accounts 2020
Percentage
owned
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)
(vii)
14 Related undertakings continued
Name and registered address
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
The Cooper Group Ltd
Tozer International Holdings Ltd
Tozer Kemsley Millbourn Automotive Ltd
Wyvern (Wrexham) Ltd
22a St James’s Square, London, SW1Y 5LP
Cavendish 1 Ltd
Inchcape Baltic Motors Ltd
Inchcape (Belgium) Ltd
Inchcape BMI Ltd
Inchcape Corporate Services Ltd
Inchcape Finance plc
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 JLR Europe Ltd
Inchcape Latvia Ltd
Inchcape Management (Services) Ltd
Inchcape Overseas Ltd
Inchcape Russia (UK) Ltd
Inchcape (Singapore) Ltd
St Mary Axe Securities Ltd
PO Box 33 Dorey Court Admiral Park St Peter Port Guernsey GY1 4AT
St James’s Insurance Ltd
4th Floor 115 George Street, Edinburgh EH2 4JN
Inchcape Investments & Asset Management Ltd
Uruguay
Rambla Baltasar Brum 3028, Montevideo
Autolider Uruguay S.A.
United States of America
The Corporation Company, 30600 Telegraph Road Bingham Farms, MI 48025
Baltic Motors Corporation
Percentage
owned
100%
100%
100%
100%
100%
88%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
70%
100%
100%
100%
100%
100%
100%
100%
(vii)
(ix)
(vii)
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020 195
195
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the financial statements continued
14 Related undertakings continued
Joint ventures
Name and registered address
Greece
48 Ethnikis Antistaseos Street, Halandri 15231
Tefin SA
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) Owned at 60% by Inchcape plc, 40% by Baltics Motors Corporation
(ix) Owned at 70% by Inchcape plc and 30% by Inchcape Australia Ltd
Percentage
owned
50%
196
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Inchcape Annual Report and Accounts 2020
Inchcape plc Annual Report and Accounts 2020
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
Registered in England and Wales
Advisors
Independent Auditor
Deloitte
Chartered Accountants and
Statutory Auditor
Share registrars
Computershare Investor Services PLC
Registrar’s Department, The Pavilions
Bridgwater Road
Bristol BS99 7NH
Tel: +44 (0) 370 707 1076
Solicitors
Herbert Smith Freehills
Corporate brokers
Jefferies Hoare Govett
JP Morgan Cazenove
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
27 May 2021
Announcement of 2021 Interim Results
29 July 2021
www.inchcape.com/annualreport
Design and production by Black Sun Plc (London),
+44 (0) 20 7736 0011
This report has been printed on Essential Offset and Magno Satin. Both are FSC®
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Printed at Principal Colour Ltd. ISO 14001 certified,
Alcohol Free and FSC® Chain of Custody certified.
197
Inchcape plc Annual Report and Accounts 2020
Inchcape Annual Report and Accounts 2020
197
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Inchcape plc
22a St James’s Square
London SW1Y 5LP
T +44 (0) 20 7546 0022
www.inchcape.com
Registered number 609782