"The new car market has continued to benefit from strong
corporate and private demand. It increased by 0.6% over 2002
to almost 2.6m units, and was the fourth successive year of
record sales. Our registrations grew by 15.7% in the year, on
a like for like basis, for our core partners Toyota/Lexus, BMW,
the Premier Automotive Group of Ford, Volkswagen and Mercedes-Benz.
UK Retail has a new management structure and is implementing
improved business processes. These factors have already resulted
in stronger new car sales, used car sales, finance penetration
and aftersales earnings. UK Retail profits and related Financial
Services' profits (included within Financial Services), before
goodwill amortisation, rose from £14.0m in 2002 to £15.3m
in 2003. This is despite a £1.0m charge for management
restructuring in 2003. After adjusting for this one off charge,
the resulting operating profit margin has strengthened to 1.6%
in 2003.
This improved trading performance was driven by strong organic
growth from our Toyota and Volkswagen businesses, whilst our
new Mercedes-Benz market area performed well. However this encouraging
growth was partly offset by higher overheads in the areas of
national insurance, pension costs and insurance. BMW also suffered
margin erosion partly due to model run outs and the disturbance
associated with the network restructuring in and around London.
Our Ferrari Distribution business had a reasonable
year whilst Maserati Distribution suffered from margin and volume
pressure. Our associated Retail business, Maranello Sales, also
had a challenging year partly due to a major fire at our Egham
workshop in the second half.
Inchcape Automotive, our Business Services operation,
suffered from a weak daily rental market, which impacted on volumes,
margins and profitability. However, our broader product offering
is starting to increase business from a wider customer base. The
acquisition of the remaining 50.0% of shares in AutoCascade, our
electronic remarketing operation, in December 2003 allows us to
fully integrate this business with Inchcape Automotive.
Inchcape Fleet Solutions enjoyed a strong 2003, benefiting
in part from the economies of scale arising from the amalgamation
of our contract hire and fleet management businesses in late
2002. Margins in our contract hire operations have improved
and the business won sizeable new fleet management contracts
in late 2003, which augurs well for 2004."
