ASE & Motor Trader Financial Conference 2013
Mike Allen
Executive Director – Panmure Gordon & Co
0151 243 0966
michael.allen@panmure.com
Overview
•
Introduction
•
UK economic environment
•
Reasons to be optimistic about UK Motor Retail
•
Reasons to remain cautious about UK Motor Retail
•
A look across the pond in the US
•
Stock market environment
•
Concluding thoughts
•
Q&A
UK Economic Environment Overview
•
UK economy recovery is underway but will be a long and slow process
•
Most economic projections suggest UK GDP growth will exceed 2% by
2015 at the earliest...
•
Austerity measures gathering pace, but likely to ease ahead of next
election in 2015
•
Unemployment structurally high, wage inflation modest and below
inflation
•
Fuel costs impacting buying behaviour
•
Consumer confidence remains fragile, buying incentives remain key
UK Consumer confidence indices
Consumer confidence (Gfk) vs DG ECFIN consumer confidence (re the economy)
Labour market dynamics
UK employment (millions)
UK private & public sector employment growth (thousand)
Inflation and consumer saving rates
UK inflation
UK savings rate
Reasons to be optimistic on UK Motor
Retail
•
New car data continues to improve and remains below historic peak
levels
•
Euro Zone markets remain under pressure
•
Pent up demand building through ageing UK car parc
•
Used car market remains stable
•
Consolidation dynamics remain attractive
•
Valuations remain below peak levels
New car registrations remain strong
New car registrations
March
Total
Diesel
Petrol
AFV
Private
Fleet
Business
2013
394,806
187,239
202,249
5,318
204,299
171,728
18,779
2012
372,835
181,368
186,047
5,420
189,468
165,565
17,802
5.90%
3.20%
8.70%
-1.90%
7.80%
3.70%
5.50%
Mkt share ’13 (%)
47.40%
51.20%
1.30%
51.70%
43.50%
4.80%
Mkt share ’12 (%)
48.60%
49.90%
1.50%
50.80%
44.40%
4.80%
Total
Diesel
Petrol
AFV
Private
Fleet
Business
2013
605,198
292,403
304,356
8,439
294,656
282,695
27,847
2012
563,556
283,872
271,486
8,198
264,884
273,898
24,774
7.40%
3.00%
12.10%
2.90%
11.20%
3.20%
12.40%
Mkt share ’13 (%)
48.30%
50.30%
1.40%
48.70%
46.70%
4.60%
Mkt share ’12 (%)
50.40%
48.20%
1.50%
47.00%
48.60%
4.40%
% change
Year-to-date
% change
Source SMMT
Clear pressure in the European New Car
Sales
March
'13
March % Change
'12
13/12
Austria
31,067
37,933
-18.1
80,024
88,764
-9.8
Belgium
53,076
59,915
-11.4
149,160
148,363
+0.5
Bulgaria
1,262
1,266
-0.3
3,541
3,926
-9.8
405
986
-58.9
1,869
3,202
-41.6
Czech republic
13,820
17,064
-19.0
36,453
43,529
-16.3
Denmark
14,959
13,704
+9.2
41,950
40,781
+2.9
1,612
1,565
+3.0
4,678
4,027
+16.2
Cyprus
Estonia
Jan - Mar
'13
Jan - Mar % Change
'12
13/12
Finland
9,492
22,938
-58.6
27,640
47,834
-42.2
France
165,829
197,774
-16.2
433,882
507,830
-14.6
Germany
281,184
339,123
-17.1
673,957
773,636
-12.9
Greece
4,493
4,902
-8.3
14,142
17,180
-17.7
Hungary
5,066
4,766
+6.3
12,559
13,961
-10.0
11,695
13,051
-10.4
39,511
45,840
-13.8
132,020
138,816
-4.9
354,931
407,832
-13.0
Latvia
805
879
-8.4
2,354
2,488
-5.4
Lithuania
955
1,003
-4.8
2,734
2,878
-5.0
Luxemburg
4,850
5,319
-8.8
12,315
13,511
-8.9
Netherlands
35,890
52,331
-31.4
115,998
166,450
-30.3
Poland
Ireland
Italy
25,403
29,597
-14.2
75,989
77,832
-2.4
Portugal
9,617
9,643
-0.3
24,147
23,504
+2.7
Romania
3,324
4,902
-32.2
12,387
13,965
-11.3
Slovakia
5,729
6,427
-10.9
14,501
16,598
-12.6
Slovenia
4,578
5,186
-11.7
12,768
14,325
-10.9
Spain
72,677
84,427
-13.9
180,724
204,118
-11.5
Sweden
22,493
28,555
-21.2
56,074
67,976
-17.5
394,806
372,835
+5.9
605,198
563,556
+7.4
European union (eu27)*
1,307,107
1,454,907
-10.2
2,989,486
3,313,906
-9.8
Eu15
1,244,148
1,381,266
-9.9
2,809,653
3,117,175
-9.9
62,959
73,641
-14.5
179,833
196,731
-8.6
Iceland
493
433
+13.9
1,333
1,076
+23.9
Norway
10,735
13,051
-17.7
33,696
34,814
-3.2
Switzerland
28,554
32,489
-12.1
71,751
79,130
-9.3
Efta
39,782
45,973
-13.5
106,780
115,020
-7.2
Eu27*+efta
1,346,889
1,500,880
-10.3
3,096,266
3,428,926
-9.7
Eu15+efta
1,283,930
1,427,239
-10.0
2,916,433
3,232,195
-9.8
United kingdom
Eu11*
Source ACEA
Key FX trends
Euro – GB£ (shown with 50, 90 & 200 day moving averages)
JPY – US$ (shown with 50, 90 & 200 day moving averages)
Government debt suggests on going weak
Euro
Euro zone gross & net government debt (IMF data)
Clear evidence of pent up demand in UK
market
UK car parc/average age
35
7.44
30
7.5
7.3
7.25
25
7.1
7.06
20
6.93
6.88
6.78
6.9
6.79
6.78
15
6.7
6.7
6.69
10
6.5
5
6.3
28.5
29
29.4
29.8
29.9
30.2
30.3
30.1
30.3
30.4
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
0
6.1
millions
Average Age
Source BCA
Supportive supply/demand dynamics in
used cars
Car parc for 1 to 4 year old cars from 2003A
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2.6
2.6
2.4
2.3
2.4
2.1
2
2
1.9
2
2.6
2.6
2.4
2.3
2.4
2.1
2
2
1.9
2
2.6
2.6
2.4
2.3
2.4
2.1
2
2
1.9
2.6
2.6
2.4
2.3
2.4
2.1
2
2
4 year old
2.6
2.6
2.4
2.3
2.4
2.1
2
1-4 year old parc
9.9
9.7
9.2
8.8
8.5
8
7.9
TIV
1 year old
2 year old
3 year old
2013
Source Market Intelligence
Valuation undemanding, above average
growth..
Price
Net
cash/debt
Inchcape
496
147.7
468.3
Lookers
92
-36.3
Pendragon
22
Vertu
39
Company
Market
Shares
Cap
P/E
EPS growth
EV
2013
2014
2013
2014
2321.8
2174.1
11.8
10.9
6.3%
8.6%
395.5
362.4
398.6
12.1
10.8
9.1%
12.0%
-190.6 1421.00
317.9
508.5
10.4
9.2
7.6%
13.5%
77.8
85.8
10.5
8.7
20.2%
21.4%
Maximum
12.1
10.9
20.2%
21.4%
Average
11.2
9.9
10.8%
13.9%
Minimum
10.4
8.7
6.3%
8.6%
-8.1
199.4
Reasons to be cautious about UK Motor
Retail
•
UK consumer still faces significant pressures on household income
– Fuel price inflation
– Structurally high levels of unemployment
– On-going squeeze on family income
– Fragile confidence
– Significant incentives to purchase still needed
•
•
Historical trends important – remember the 2% rule
OEM behaviour likely to remain erratic given Eurozone pressures –
close eye needs to be kept on dealer targets
Used car values appear to have fallen in March – seasonal adjustment
as opposed to real market income
Cyclical industry on wafer thin margins = rocky road at all times
•
•
The 2% rule in action since 1988
UK New Car Regs
% growth
Used dealer sales
% growth
2.67
UK GDP growth
1988
2.22
1989
2.30
3.6%
2.76
3.4%
5.0%
1990
2.01
-12.6%
2.71
-1.8%
0.8%
1991
1.59
-20.9%
2.82
4.1%
-1.4%
1992
1.59
0.0%
2.64
-6.4%
0.1%
1993
1.78
11.9%
3.1
17.4%
2.2%
1994
1.91
7.3%
3.28
5.8%
4.3%
1995
1.95
2.1%
3.91
19.2%
3.1%
1996
2.03
4.1%
3.88
-0.8%
2.9%
1997
2.17
6.9%
4.14
6.7%
3.3%
1998
2.25
3.7%
4.1
-1.0%
3.6%
1999
2.20
-2.2%
4.03
-1.7%
3.5%
2000
2.22
0.9%
3.69
-8.4%
3.9%
2001
2.46
10.8%
3.61
-2.2%
2.5%
2002
2.56
4.1%
3.57
-1.1%
2.1%
2003
2.58
0.8%
3.87
8.4%
2.8%
2004
2.57
-0.4%
3.66
-5.4%
3.0%
2005
2.44
-5.1%
3.87
5.7%
2.2%
2006
2.34
-4.1%
4.01
3.6%
2.8%
2007
2.40
2.6%
3.97
-1.0%
2.7%
2008
2.13
-11.3%
3.61
-9.1%
-0.1%
2009
1.99
-6.6%
3.53
-2.2%
-5.0%
2010
2.03
2.0%
3.67
4.0%
1.5%
2011
1.94
-4.4%
3.74
1.9%
0.7%
2012
2.04
5.3%
2.3%
More pain to come in the housing
market?
UK house price PE ratio
A look across the pond
US vehicle sales – shown with recessions
Stock market environment
US mutual fund flows (weekly data)
20000
Total equity
Total bond
15000
10000
5000
0
-5000
-10000
W1 April
W2 March
w5 January
W3 February
W2 January
W3 December
W4 November
W1 November
W4 Sept
W3 October
W3 Aug
W1 Sept
W4 July
W1 July
W2 June
W4 May
W2 Apr
W1 May
W3 Mar
-15000
W4 Feb
$mn (wkly)
Emerging vs. Developed market equity indices (FTSE data)
Concluding Thoughts
•
UK economic recovery will be long and slow
•
PLC dealer groups expected to make progress in 2013 vs. a decent year that was
2012 – H1 2013 should be good
•
Dynamic sector with improving performance standards – online presence, stock
control, cost base optimisation and consolidation
•
Stock market valuations undemanding at this stage of the cycle
•
Beware of fickle stock markets as well as consumers and on-going macro
economic concerns
•
Rocky road always the case in this sector but through the worst
•
Q&A