Inchcape plc (INCH) Earnings Call Transcript & Summary

Well, good afternoon, everybody, and welcome to the Inchcape Capital Markets Day 2021. Thank you to everybody who's joined us online. And can you believe it? Thank you so much for also for everybody being here in the room in London. Now I joined the company in the middle of 2020, and I should say who I am, by the way, I'm Duncan Tait. And it is my privilege to lead Inchcape on the next phase of our growth story. And I joined in the middle of 2020. And in February of this year, you know that we shared with you our strategic framework. And the Inchcape team has been working hard to make our strategy a reality every day since. And it's our objective today to bring our strategy to life for you and to show what a great growth story Inchcape is. Now you'll be wondering how we're going to make this come to life. So here we are. There's 2 blocks to our agenda today. The first block, I'll take you through industry macro trends. And then we're going to take a deep dive into our strategy and into our core distribution business. And you know that this market is incredibly fragmented, and we'll talk to you about our views on industry consolidation. We'll then break for Q&A and some refreshments to get your energy back for the second part of the day when we're going to talk about vehicle life cycle services. Inchcape taking a greater share of the value of the vehicles life. And then we'll show you our financial framework. Then I'll come back and wrap up. And then we're going to break for some drinks and canapes, and you never know, you might be able to have some fun with the Inchcape team. I can see a lot of skeptical faces. But I promise you we'll have some fun regardless. Now I'm joined on stage this afternoon by 3 other Inchcape people. So Gijsbert de Zoeten, or I hope many of you will know. We have Inchcape veteran, George Ashford; and Mark Dearnley, who is all things data and digital. We're also joined by other members of the group executive team, and Inchcape executives from right across the world. Now what you see on this slide is a company deep in automotive distribution experience. But then you see some new faces. And the new faces have all come in to accelerate our strategy, particularly in the area of data and digital. It is a team that I'm incredibly proud to lead. Now we are on an ambitious growth journey. Inchcape is already the largest independent global automotive distribution company in a highly fragmented market. And we've built a distribution platform, which our OEMs can plug into to drive performance in the markets, in the lower volume, more complex markets. Some of you will know, if you look at the top right-hand corner of this slide, that I spent over 30 years in the technology industry. I've worked with some of the most advanced customers using technology to drive their businesses forward and about the privilege of working with some of the leading technology companies right at the board level. I can tell you that what we're doing in Inchcape is really exciting and is leading. We believe we have competitive advantage, significant competitive advantage in the area of data and digital, and we are not afraid to use it. We are also uniquely positioned to capture the lifetime value of a vehicle. And over the last 18 months, we've been developing what you would call our ESG plan and what I would call our responsible business plan. And we'll talk more about that in a moment. When you put these 5 things together, you get a company that can deliver significant value through organic growth, through consolidation and cash returns. Now also over the last 18 months, we have refreshed our purpose. Built on hundreds of years of global trading, our company knows exactly where we fit into the value chain. Our job is to bring the products and services of our OEM partners to markets right around the world. And we do so for the better, a better distribution platform for our OEMs to plug into to drive performance, but better for society, better for the planet, better for the people that work for Inchcape, better for the places we operate in and invest. And with the practices we have in our company, an even better custodian of our OEM brands in those markets and they trust to lead for them still with me. Still with me? Good. So let's move on to our next topic, which is all about industry and macro trends. Because of course, as we put our strategy together since the middle of last year, we've taken a 360-degree view of the world that we live in and what's going on in automotive. We've spoken to OEMs and our colleagues, analysts, external industry experts, OEMs and shareholders. And we've put all that together as we reflected on what are the ambitions of our OEM partners. What are the mega trends doing to their ambitions and changing our industry. And from that, we've defined our purpose. We've established our gaps, and we decided our direction. And as I said a few slides ago, this company is now executing. Now you know this, don't you? But the automotive industry is changing fundamentally and changing fast. It's an environment that Inchcape thrives in. OEM ambitions are becoming increasingly aligned to ESG objectives. Our OEMs are investing heavily in the case trends of connected vehicles, autonomous, shared mobility and of course, electric vehicles. And they know, as we know, that you have to transform the route to market to be successful in the future. And that middle block there around changing consumer dynamics is all about that. We've looked at other industries, what has Amazon done to other industries? What can we learn from that about how to radically change the way we engage with consumers? And then on the right-hand side of this slide, you can see we've taken a view about the focus on environment and society, particularly with reference to CO2 emissions and having a company with the right purpose that attracts brilliant talent who can do great things for our OEM partners, our customers and of course, for Inchcape. Now I'm sure when you woke up this morning, you must have been excited you were coming to an Inchcape Capital Markets Day. I can see on your faces. And shortly after you realize that, you would have been thinking about the topic of EV. So let me take 2 or 3 slides to talk about the topic of electric vehicles. On the left-hand side of the slide, you can see we partner with winning OEMs who have an ambitious view of EVs. And if you look at where they want to be by 2030, many of them talking about having at least half of their sales in -- driven by EV. On the right-hand side of the slide, you can see that Europe will lead the way. So by 2030, 50% or more of all vehicles sold in Europe will be pure EV. But Inchcape is also practical. And let's not forget, we operate in many markets in Asia, Africa and Latin America, where the pace of infrastructure development will not enable 50% EV penetration by 2030. And you can see from this slide here where we think Southeast Asia and the rest of the world will be. So we believe inside Inchcape, the EV is absolutely on the rise. We are ready for it, and we'll show you in a moment. But we also believe the hydrogen plays a role in the future as does hybrid technology, particularly in some of these emerging and developing markets. And we've been helping OEMs enter new markets and deploy new technology in markets right around the world for decades. It is what we do. It's why a lot of our OEM partners see great value in teaming with Inchcape. We are experts in the markets that we operate in, both in terms of regulation, of policy, of consumer behavior, the direction of travel of the infrastructure. On the right-hand side, you can see the current state of the markets that we face into. Of the 36 markets, 3 have said there will be an end to internal combustion engine vehicle, Singapore in 2030, U.K. in 2035 and Costa Rica in 2050. But have no doubt, one of Inchcape's core competencies is the introduction of new technology into our markets. Now the next thing you would have thought about this morning, when you were talking about -- thinking about Inchcape Capital Markets Day EV was the topic of after sales. You've all read that report. So let me tell you about one of the great things about being in a company that has exposure to mature markets in Europe with increasing EV penetration as well as being able to look at emerging markets around the world as we get to see what really goes on. And the first thing I'd say before we go through what the data on this chart tells us is, let's not forget what EVs are. They are incredibly complex pieces of technology. They are way heavier than your average internal combustion engine vehicle. And these vehicles are, by their very nature, connected and data-rich. So what are we seeing in real-world EV as, by the way, corroborated by talking to many of our OEM partners. So yes, I agree that it's way less oil that's consumed in EVs and there's fewer moving parts. But the weight of these vehicles means that we're seeing more wear and tear, particularly in the area of tires and brake pads. The parts also tend to be more expensive. And because of the complexity, we're seeing more service hours. And because of complexity and the connectedness and data richness of these vehicles, we're seeing higher customer retention. So not losing them outside of the OEM after sales ecosystem. So they're staying with us. Now on the right-hand side of this chart, you can see about where we think EV penetration will get to around 2030. So something like 10% of the global park. In Inchcape markets, probably around the same time. It will be a little bit less than this 10% number. But you can see from the last few slides, for us, EV is a tailwind rather than a headwind. And we embrace EV, and we want to help our OEM partners to deploy that into our markets when those markets move from a hybrid phase to an EV phase. Now the next topic is about what is this thing called the Internet and digital done to how the value chain splits between distribution companies and retail. What we show you here is OEMs on the left-hand side, customer on the far right, and then look at what the responsibilities that are moving from retailers into the distribution of the national sales company. So the following things are moving. Responsibility for marketing, responsibility for customer data and customer management, and responsibility for the management of stock. Now I'm not saying for one moment, the physical retail doesn't play a future in the world of automotive. It does, but it does so in an omnichannel context, enabling consumers to move through their buying journey and bounce between digital and physical as they make their unique buying journey to buy a vehicle. Let's take a little look more at what -- about what consumers are doing. This is data from our markets. If you look at the top left-hand side, what are consumers doing now when the statistics go. For those of you under the age of 45, 95% of you will start your buying journey online. If you happen to be a little older, then 85% start their buying journey online. And what does that mean practically? It means that consumers spend an incredible amount of time researching their vehicle before they go near any physical dealership at all. 4.5 to 6 hours and potentially for EV even more than this. The number of visits to a dealership has reduced significantly from somewhere around 4 or 5 visits to a dealer to buy a vehicle a few years ago to just 1.4 visits. What our consumers tell us is they value digital experiences in a dealership. And that 75% to 85% of people will walk into a dealership knowing what vehicle to buy. Now on the right-hand side, you can see the conclusions of this, way more time spent online, consumers expect a beautiful buying experience delivered by omnichannel technology through the Internet. And they expect that experience to be personalized to them. It's all about me as the consumer and how you're going to enable to understand where I am in my journey, whether I'm in a physical dealership or online using omnichannel. The next topic I'd like to talk about is what are we seeing OEMs doing. Now you see the way this slide works. We're showing you markets with -- where OEMs sell less than 10,000 vehicles per annum and larger markets where OEMs sell more than 50,000 vehicles per annum. In those smaller, lower volume, more complex markets, OEMs have outsourced 20% more of the distribution contracts from 2016 to 2020. And we know OEMs have 2 huge challenges. Number one, funding the intellectual capital and the financial capital to move to EV, and at the same time, concentrating on their very largest markets. Think China and the U.S. and Germany, for instance, where there are certainly in China, in the U.S., tens of millions of vehicles consumed every year. So focusing on those. And then for my conversations with OEMs, we know they want fewer, better capitalized, more capable partners to work with. So if I bring all this together, the automotive industry is changing and changing at pace. It is a world in which Inchcape thrives. We provide OEMs with a solution for these lower volume, more complex markets. And our job is to collaborate with OEMs to get their objectives achieved in the markets that we run for them. Consumer dynamics are changing. It drives a data and digital answer, and it is all about consumer experience in the buying journey. And from a focus on society and the environment, we are a future-focused, purpose-driven employer, and we take our responsibility seriously. Now let's move to our strategy. So on the right-hand side of the slide, you can see about the markets around the world and where OEMs start to use independent distribution companies. So you can see China at 22 million vehicles per annum, the U.S. at 17 million vehicles. But then you get down to around Australia, where that's 1 million vehicles sold per annum, which is where OEMs start to use independent distribution companies. And you can see the deep blue lines, as you move further and further to the right of this slide is where we have the Inchcape markets. Now why do OEMs choose Inchcape? We are a specialist distribution company. It's what we do for a day job. We are nimble, we are fast, we are efficient, and we have built market-leading technology to enable and to drive performance in our markets. And we have been doing this for decades as a well-run, well-governed U.K. plc. And we have 2 enormous growth opportunities in front of us. On the left-hand side, you can see the total number of vehicles that are sold every year-ish around the world at around 90 million. There are 17 million of those go into the markets that are best suited to Inchcape. So a 17 million target addressable market for our distribution business. On the right-hand side, you can see that we break down the vehicle lifetime value. The initial usage phase would, of course, Inchcape is very present, accounts for about 25% of the total profit pool for each vehicle. In subsequent years, 75% of the profit turns up in years beyond year 4 and onwards. And that is the segment of the market that is currently underserved by Inchcape. So 2 enormous growth opportunities in front of us. Now you will remember, many of you remember, Stefan would have stood up on a stage like this not long ago and would have talked about our Ignite strategy. And Ignite has been a great gift for Inchcape. And there are 2 particular gifts that come to mind when you look at this company. Number 1, an increasing focus on distribution; and number 2, great OEM -- great relationships with winning OEMs. And we are taking that, and we are supercharging it for growth into our strategy that we called Accelerate. So let me unpick Accelerate a little bit for you. Top left-hand corner, distribution excellence. It's the life blood of this company, it addresses us biting into more of those 17 million vehicles. And we have just a little bit over 1% of that total market today, an enormous opportunity for us to grow further. Our vehicle life cycle growth driver is all about us taking a greater share of the lifetime profit pool of a vehicle. Now to do that, we have 3 big enablers. Our culture and capabilities, our investment in data and digital and analytics and efficient scale operations built on a foundation of this company having a responsible business strategy. And what does that mean? In culture and capabilities, you take a relationship mindset, an entrepreneurial mindset. You put that together with great investment in data, digital and analytics that drive every decision inside the company. You use our scale and our investments that we are using to make this company a low-cost platform. And what do you get? You get more customers, more markets, more OEMs and then Inchcape to growth. And I've spoken quite a bit today about our responsible business strategy. So let's talk to you a little bit more about that. We have Inchcape teams working right across the world in each of our markets to help build our responsible business strategy. They came up with 4 recommendations about the way we should think about responsible business: the planet, people, the places where we operate in and the practices with which we run our company. And you can see the main focus areas under each one of these. In terms of milestones we've achieved in 2021, our responsible business strategy is now signed off at Board level. We have global work streams working with each of our regions to make sure we execute our plans. And we have set crucially CO2-reduction targets for Scope 1 and 2 based upon our 2019 CO2 footprint. And by 2030, we will have reduced our emissions by 46%. Consistent with no more than a 1.5-degree warming. On the right-hand side of the chart, you can see what we're going to do next. So we will report in our annual report according to TCFD guidelines. And we are reducing our energy usage, deploying more renewables, deploying solar panels to make sure that we deliver on our commitments of 46% reduction. Now many of you will also have in your mind about Scope 3 CO2. And we are working through Scope 3 CO2 reduction during 2022, and we'll come back and tell you exactly what our plans is for Scope 3. It is an incredibly complex area. And I hope you can see in the way we've attacked Scope 1 and 2 is we do so using science and data, and we do it genuinely. And we'll come back to you during 2022, with our same for our plans for Scope 3. Right. Let's get more into distribution excellence, shall we? The core of our company. So distribution excellence, let's bite into more of those 17 million vehicles that go into the markets that are best suited to Inchcape using these 3 enablers. Now I mentioned before that we have built a distribution platform for our OEMs to plug into to drive performance. And in the blue areas on the outside of this circle, you can see these are the functions that a distribution company has when you're running markets for an OEM were involved with product planning for a market, and we leave that, which are the best vehicles to take into a marketplace. Is it SUV, sedans, cabriolet, we plan that market according to our knowledge, deep knowledge of that marketplace and consumers in that market. We're then responsible for landing those vehicles in the market. Bottom right-hand corner, we're responsible for building the brand for our OEMs in the markets they get us to look at for them. And then we drive marketing programs, which then drive performance. We're responsible for the channels in that country for setting up the retail network and crucially for setting up a market for -- the capability for aftermarket services. Now in our differentiated distribution platform, zero in, in the middle of this chart. It is differentiated because of our investments in digital customer experience, our investments in data analytics, our global connected platform that enables us to deploy our processes consistently right around the world to deliver efficiencies. And much to my delight, brilliant people, brilliant entrepreneurs that drive each of our markets on the ground. And what do you get from this? OEMs get better performance. We deliver an unforgettable beautiful customer experience, attracting the best people in the world to join our company in our distribution business, and we deliver great results for Inchcape. Now this is the Inchcape footprint today. We're in 6 continents right around the world, 36 markets, 41 OEM partners. And one of the benefits that our OEM partners see in this has been able to test us in one market before being able to use this right across the world to drive markets for them. Now you don't just have to take my word for it. Let's see what our friend Hao Tien, who's the COO of Toyota Motors Asia Pacific, what he thinks of Inchcape. And we've been work -- he knows us as Borneo Motors, a company we bought in 1967, an Inchcape company based in Singapore. Play the video, please. [Presentation]

Thank you very much, Hao. Right, to be pleased to hear, I'm almost at the end of my section. Now the distribution market has high barriers to entry. They're built on exclusive relationships, one brand in every market, and those relationships are long-standing. And you need a track record of delivery and the strength and expertise to deliver for our partners based upon really strong financial foundations. So how does Inchcape measure up? We're well invested with a leading digital platform. Our relationship to some of our OEM partners are in their sixth decade. Our youngest set of major partners were moving into decade #4. We deliver for our OEMs at scale in 36 markets, with new OEM partners who are winners of the future moving on to the Inchcape platform. We are financially strong and I am delighted to be surrounded by experienced, future-focused leaders in our company. So with that, thank you for listening to my part of the presentation. We're now going to -- you're now going to hear from 3 Inchcape executives. George Ashford will take you through distribution excellence. Mark Dearnley will talk to you about our investments in data and digital. And then because this is a fragmented industry within which we operate, Gijsbert de Zoeten will talk about our opinion on consolidation. So George, with that, this is all yours.

Right. Thank you very much, Duncan. My name is George Ashford. I suppose I should be glad that I'm described as an Inchcape veteran rather than just a veteran. So thanks for that, Duncan. But I've worked in Inchcape for over the last 15 years. And it's been my privilege and my pleasure to lead many of our business units over that period, businesses in Europe, our Australasian business unit and most recently, CEO for our Asia Pacific region. So in December 2020, Duncan asked me to come back and lead our transformation journey. And I have to tell you, I'm more excited about the future in front of us at Inchcape than I have been at any time in my 15 years of tenure. In the next few slides, I'm going to put some substance behind that statement by talking firstly about how the OEMs vision for delivering customer excellence has evolved and how our investments and changes we're making to our business model make us better positioned than ever to deliver against that vision. So let me start with OEMs. Now after the EV challenge, the opportunity to significantly improve game change the customer experience for our customers through the application of data and the delivery of an omnichannel experience is the second most critical strategic challenge that our OEM partners must address. Now in the large markets, they're going to aim to do this themselves. But in those smaller markets, as Duncan has described, TIVs of less than 1 million, they're already seeing incumbent, independent distributors without the scale or the appetite to invest to build that solution. And in those smaller markets where they represented themselves through their national sales and marketing companies, they see the opportunity to entrust those markets to an independent distributor with data and omnichannel capabilities has an opportunity to redeploy resources against the EV challenge. So consequently, for a capable independent distributor, the opportunity from distribution -- from disruption has never been more real. There's an opportunity to grow share, enter new markets and work with new OEMs. And at Inchcape, we believe we are uniquely positioned to be able to exploit that opportunity. Firstly, we have over 50 years of distribution management experience. That means our OEM partners trust us to run brands in markets. And the new capabilities we're building make us an even more attractive proposition, our ability to roll out omnichannel experience to support it with data analytics. The way we're globalizing our back-office processes, so we're an efficient, easy company to deal with, with world-class governance in very difficult markets. And finally, how we're growing our internal finance and insurance capability to be able to offer customers in those markets, increased accessibility to our brands. We are in the best position we've ever been to support our OEM partners and their future ambitions. These investments and changes that we're making in our business model will also allow us to improve critical business KPIs. We will grow share by delivering an even better customer experience. As the customer configures the car in the comfort of their own home, we see them adding accessories, increasing the basket size. We will see greater lead conversion as our communication and management of the customer through the process gets ever better. We will see improved margins as we discount less, better customer retention as we make that aftersales experience less and less frictionful, and our communication to customers mean that they come back to repurchase with us more often. An access to incredible data will mean that we can better balance demand and supply and operate with lower inventory levels. So everything I've talked about today is about our value proposition to the OEM and the business metrics that will be improved from our investments. But none of that works if those changes aren't informed by a deep, deep understanding of the customer. We've conducted global consumer research, and that has shown that the current automotive customer experience under-delivers against 4 critical core values: trust, transparency, convenience and personalization. That same research identified 17 pain points in the customer journey that need to be addressed in order to be able to deliver against these 4 core values. Now through technology, we're building products to improve against those pain points. We're going to leverage our customer-first culture, which has been a constant in the Inchcape organization over my tenure. And we're using data to constantly iterate and improve our delivery against those pain points. You cannot stand still, and you need to use data to constantly iterate and improve that customer experience. Now we're going to have to make changes across our value chain over time. But like all organizations, we can only do so much at once. So we have 4 current priorities: sales and operation planning, making sure that we are managing our demand forecasting and our supply management. Digital marketing, making sure that we are optimizing ourselves in search engines, driving better traffic and converting that traffic as effectively as we can. Customer relationship management, making sure we retain those aftersales customers and ensuring that they come back to repurchase with us. And finally, omnichannel fulfillment, using our digital platform to ensure that our customers can interact with us where, when and how they want. So in the next few slides, I'm going to build out a little bit more detail behind these priorities and what we've done. I'm going to start with sales and operating -- operations planning. This is the most mature of the initiatives that we've launched. As I've worked in various markets across the Inchcape world, it's become very -- it became very, very clear that our S&OP process had enormous opportunity for improvement. Too much time was spent in collecting data, filling reports, leaving almost no time for quality review and quality decision-making. What we buy each month, if not the most important decision we make on a monthly basis, it's certainly one of them. So when I move to Asia, working with the team, we took the opportunity to improve the process. We centralized the collection of the data. We applied technology to analyze the data to derive insights, reducing the time taken to produce reports and insights for the market. We overlaid that with a governance around decision-making, the right people in the right meetings at the right time. And we started to build out benchmarks that allowed us to improve performance across the region. Now in the first 18 months, we reduced our stockholding by 20% across APAC, which had a material effect on improving our margins. As we started to roll this process out, COVID hit. Now the visibility of data, the availability of insights through that disruption of COVID, furnished by S&OP process, meant that we navigated that unprecedented disruption far more effectively than we ever would have done otherwise. And we actually emerged from that, a much less complicated business. One of the tenets of S&OP planning is to reduce the complexity of the stock you hold, not to stop those models and variants that don't sell. So we exited COVID with a 30% reduction in number of variants we carry across the world, making us a much more simple business. Now currently, we're in a supply-constrained environment, but that will change. And how we navigate that transition will be absolutely critical for our profitability. Our S&OP process now allows us to look out at demand 6 months forward and incoming supply 6 months forward. So we're going to be able to navigate that transition far more effectively than we ever would have done in the old world. Let's move on to customer relationship management. F&I, innovative F&I products allow us to broaden and deepen our relationship with customers. It improves accessibility of a brand or a model in a market. The ongoing communication with the customer allows us to deepen that relationship. And our ability to represent finance pricing through finance calculators on our websites, enhances the transparency of pricing for our customers. Now perhaps the most effective and famous products are PCP, certainly here in the U.K. and guaranteed future value product. Those customers are 4x more likely to come back and purchase a car than people through other finance products. Scaling that out across our markets is an enormous opportunity. It supports all of our income streams, new car sales, more cars coming back by shortening the life cycle of ownership. More used cars as people turn their cars more often, more high-quality used cars. Incorporating after sales into these F&I products to drive increased retention and loyalty and using warranty and insurance products to keep the customer in our aftersales network longer. Embracing digitalization and making smart use of data. I've talked about our omnichannel proposition and our data analytics capability. We've branded these internally as DXP, our digital experience platform. In the last 18 months, we've made incredible progress to build out a product suite that enables the customer to interact with us where, when and how they want. That digital platform is being rolled out across our markets across our brands, reinforcing the value proposition to our OEMs and the experience our customers are able to enjoy. The other platform is our data analytics platform, DAP. DAP is where we house the technology and the people to be able to use the data harvested from our technology, from our finance systems to turn into insights and action that will allow us to continually iterate the customer experience, making it more personalized and more individualized and giving us insights in how to run the businesses better. Now the good news is the results from these initiatives are starting to show through in genuine improvement. This year, we've grown our web traffic -- website traffic by over 6%. These are global numbers. Behind that mix -- behind that number is a better mix of organic traffic, the most valuable traffic we can generate. We've increased the number of marketable customers we have by 22%. That means in our Salesforce CRM database, we have over 5 million customer contacts. The next 2 bubbles refer to people who've used our DXP platform rather than going through the process in a traditional way. Those who use DXP are adding accessories in the configurator experience. That means that their basket size is, on average, 6% higher or GBP 1,400 more than those who don't use that experience. And their conversion rate is twice what it is for customers who go the more traditional route. So some very encouraging signs on what this will deliver. Perhaps most impressive of all, over that same period, we've improved our customer experience scores as measured by reputation.com by 16%. And now they say a picture says a thousand words. So let me share with you a video that brings to life what that customer experience looks like through our DXP and DAP platform. Run the video, please. [Presentation]

That gives you an insight into just how we plan to transform the customer experience. So I will finish and hand over to Mark, who will give you more of the substance of what sits behind that platform. Thank you very much.

Thank you, George. I hope you all enjoyed that. We spent an awful lot of time working with our OEM partners, with our dealer networks with our staff and also with our customers to put that together. And yes, we're absolutely committed that pictures are much better than 1,000 words on PowerPoint slides. So a huge amount of work that's gone into that. So I joined Inchcape last year immediately prior to Inchcape as a partner with Bain & Company. And before that, I spent 20 years as between CTO and CIO roles in a number of industries from retail with Boots, telco with Vodafone, the U.K. government and then in private equity. So it's a real privilege to be part of this Inchcape journey. So let me share now some of the fantastic progress we've been making to bring alive our digital and our data and analytics journey. I'm going to take you through the different modules of what you've just seen in the digital experience platform. And then later on in the presentation, I'll take you through how far we've got in rolling this out across all our OEMs and around the world. So it all starts with what we do with customer campaign management. Knowing the customer, understanding the customer, being able to market to them and understand where they are in their journey is something we control and the ability to coordinate that and keep improving it. That takes us into contact management. How do they want to talk to us? Do they want it to be through the e-mail? Do they want it to be through chat? Do they want to be talking over the phone? Do they want to be in a dealership? Let's manage that, do it the way they want. Omni-channel is everything we're trying to be. Maybe that turns into a lead, and we'll talk about how we optimize lead management later on in the presentation. But managing those leads end-to-end, so they go seamlessly from online through an interaction, could have been chat, could have been phone, into the dealership or straight to the purchase, which takes us into the commerce side. You've seen that in the video, completely seamless end-to-end. They don't need paperwork. They don't need anything like that. It can all be done online or it can all be done in a dealership if they choose it to be that way. So we've got all those key modules. Now they've got their vehicle. Then we get into aftersales. So a whole capability all around being able to manage the life cycle of the vehicle proactively, reactively with the customer and engage with them through that, and then on the day of their interaction with us, make it as seamless as possible through the whole journey into the independent dealer as well. That's built on having a very, very strong customer account. Single view, everything that's going on for that customer, all the details for them, knowing what's happening and how we've worked with them over many years, and we'll see later how we then use that data to optimize the ongoing journey. We work very closely with our independent dealer partners and our own retailers in the markets where we have those. So the dealer solution and how this integrates, how we can make it seamless through that whole supply chain for the customer. So a very strong dealer solution that we give to our dealers to use. And then if you can imagine all of this information being available, what we can then do with our listings and our syndications to publish that data back out onto the Internet to start the journey all over again. So this is a hugely comprehensive platform. And DXP sits within our much wider Inchcape digital architecture, which is at the heart of everything we're trying to do. So let me tell you more about our architecture. So we've designed our digital architecture with 2 things in mind: the first is being able to have very specific go-to-market offerings, and the second is being able to leverage our global scale. So at our go-to-market level, in distribution, this is all about DXP. This is all about everything you've just seen, really being out of focus on the specific needs of that journey. When we come on later to talk about vehicle life cycle services, we'll talk more about the new areas we're going into and the ongoing ownership of a vehicle. They too will need very specific go-to-market capabilities. But we're a global business. So our advantage is we can then have a core of capabilities that bring all these things together. So we have a single data and analytics platform that joins up across everything. We have a single finance broker engine that enables a lot of the F&I that George talked about that joins up across everything because we'll need financing in many places. This is then underpinned by a consistent enterprise resource planning system. So this is finance, this is logistics, this is HR, all the things you want consistent globally so that you can have a very simple view of everything that's going on. Underneath, global network, global cloud infrastructure, everything joining up so that we get the economies of scale and we get the best possible solution to be used in every market, all underpinned by a passion about being in control of cyber security. So we have a lot of data here, and it's really important data for our customers. It's really important data for our OEMs. And we are investing very heavily in the cyber protection that goes around that to make sure we look after that data and keep those bad actors out. We work really closely with key technology partners to put this together. So we've got Salesforce, you've seen. We work very closely with Microsoft in the analytics area and with SAP and Google in the enterprise resource planning area. And then on top of that, with a combination of our amazing people, and we'll talk more about those as we go forward, but our amazing people and some innovation partners. We look at really clever things around how we do our online signatures, how we present the forms that people actually have to fill in about some of our cyber work and some of the other areas. So we have this combination of real core partners and innovation partners working very closely with our teams. So that's the architecture. We talked about DXP. Let me talk more now about the data and analytics platform. Our data and analytics platform delivers in 2 areas: predictive analytics and business intelligence. In our predictive analytics, we're using machine learning now to dynamically optimize the action we take based on what the customer is doing at that point in time. Now the areas we're currently testing this in: lead scoring, vehicle pricing, parts pricing, churn prediction. You can imagine the optimization opportunity in here and the improvements in the experience we can create and also the improvements in the economics we can create. And I will drill into the lead scoring one and show you a case study of that in a minute. On the business intelligence side, what we're doing there is making sure we standardize our KPIs around the world. We stream the data in about those KPIs in real time and are able to present back to every market the ability to see where they are, what they're doing and how they optimize their performance every time they're doing some form of action. It allows us to trade in the best possible way. This is all underpinned by our significant investment in data infrastructure. Here, we're working very closely with Microsoft. And around the ML piece, we work with an organization called Databricks, which has allowed us to massively streamline how we're testing our models and how we control the release of those models around the world. The nice thing about the models that's really coming out of our testing is that the similarity of each machine learning model globally rather than having to have one for each use case, for each market, for each OEM, we're seeing huge commonality around the world, which means the more data we bring together, the better the models get. And it's a very quick self-reinforcing thing. So very excited about this, and I can tell you more about the lead scoring one. So we've done lead scoring in Inchcape forever. It's always been a really important part of what we do. But up to now, it's been fundamentally rules-based. Customer takes an action, we have a reaction. And every time, if they do this, we know we should do that. So for example, if you say, "I would like to join a mailing list." You will be put on an e-mail campaign. Makes a lot of sense, been very successful. Same with, "Download a brochure. We think you might be a warm lead. The contact center will probably call you up and see what you'd like to do next." Now that we've got all our data in one place, and if you remember back to my earlier slide, we have that single view of the customer. We can see what a customer is doing in real time. We know what browsing they've done. We know whether they own a vehicle. We know when they last had a service. We know when they last downloaded a brochure. We know their lifetime history with us. With machine learning, we are able to analyze that in real time. When they take an action, we look at what everything about them and we come up with what's the best reaction to have for them. Now what we're seeing in that is that we have a much higher hit rate then on the hot leads. So we're seeing a 60% improvement on conversion on hot leads, and that is then driving much more efficiency in our staff in the call centers and in the dealerships. This is a hugely exciting area, and it's an area we continue to work on and we can see enormous potential in this. So we're really pleased with the progress we're making on DXP and on DAP, but we're absolutely not complacent here. And we spend quite a lot of time benchmarking ourselves against our competition. So we recently ran an independent review of where we sat against our leading competitors against the dimensions of digitization and analytics. And right now, we believe we're ahead. But it is only a point in time. And we're absolutely not complacent that we're going to remain ahead. So our focus is about accelerating even further beyond where we are. And we believe there are -- the key to doing this for us is how we leverage our scale, and we see our scale in this way in 2 dimensions: first is technology and the second is in operations. So if I start by looking at technology, this is where we've been investing over the last year in our technology hubs. In the last 6 months, we've built 2 digital delivery centers: 1 in The Philippines, 1 in Colombia. We now have over 500 Inchcapers working within those centers, and they didn't exist at the start of the year. They are working on our key products. So they're working on DXP. They're working on DAP. They're also working on our ERP platform, which is SAP. And just as an example of that one, we've just -- Geely, who have just come on board as an OEM, all of the setup for Geely was done out of these centers. So this is really exciting for us, and we're seeing huge opportunity. We see this as a way to do more, to do it better, to do it faster and do it for the same spend. And we retain the IP. This is our people building our digital future. So we're really pleased with this. If I then look wider, the other area of scale we have is operations. So in operations, we're looking in 3 areas: finance, HR and recruitment and distribution transaction services. And again, we're already making progress. So in finance transaction services, we partnered with Cognizant. Already, our APAC team, our Russian team and our U.K. team have moved into our GBS service, our Global Business Service. In HR and recruitment, we partnered with SAP. And we've just started the program now to roll out globally a common way of managing recruitment and managing people, and that will go out over the next period of time. Now once those have matured more, we will then move into distribution transaction services. And that's where we see a lot of the processing that goes on within distribution, it can be more standard and more organized. This area is where we think we can do more and do it better and do it cheaper, okay? And it gets us ready -- the more but it gets us ready for when we do M&A because this is a great integration engine for when we do more of the M&A that we're going to talk about later. So now I get to show you where we've got to with the DXP rollout. It's fantastic. We started the year with one OEM and one market. The chart says we've got 8 OEMs and 18 markets. Last night, the 19th market and the 9th OEM went live. Actually, Mercedes, we've got a nod over there. You know Mercedes went live last night. We're now at 19 markets, 9 brands. The approach we've taken to this is that we get it right for each OEM. So we're really focused on getting the right brand experience for each of the OEMs. Then when we've got that experience right, working really closely with them, we can then roll out around the world for that brand. So there's a lot more to come in here. There's a lot more functionality. There's a lot more brands to roll out. You can see the next wave that's coming in, and you'll see a lot more of this over the coming period. So if I bring this all back together, probably the best way to look at 4 things. We've established our digital platform. We've really started to build our digital delivery capability that Inchcapes. That means we can go even faster. We're leveraging our data and our analytics, and that's really starting to deliver results already. And we're accelerating our digitization, and you've already seen from George, the improved results that gives us. So before I hand over to Gijsbert, you're going to hear a video from Jaguar Land Rover, who you will see really like the DXP platform, who'll be joining us very soon. And then you'll hear from Romeo, our Americas and Africa CEO. So can you roll the video, please? [Presentation]

Hello. Good afternoon. Thank you, Romeo. Thank you, Mark. And of course, more importantly, thank you, Frank and JLR. I'm Gijsbert de Zoeten. Let me tell a little bit about myself. I see a lot of familiar faces supported in the room. I started to work for Unilever, where I worked for more than 25 years in many different parts, [indiscernible] in Brazil and spent the last 6 years being the CFO of our 12 billion European business. Then I moved to LeasePlan, one of the leading lease car companies, 1.7 million cars served, 1.1 million cars on the balance sheet. That was an exciting journey with private equity that got me into automotive. And actually, I quite start to like automotive, and that is why I moved on to Inchcape, where I'm now since September '19. So just a little over 2 years, but it does feel much, much longer, and that is perhaps because of the intensity of working with everyone during COVID. I'm very, very excited to be at Inchcape. I've had the luck to see 11 markets on the ground. And I'm very proud that I can help to write the next chapter for this fantastic business. But I have to say, I can't wait to get out and see those markets again. So that's a little about me. This section is about industry consolidation, as Duncan said. So it's all about inorganic growth. And let me start with the key messages. Number one, this market is very fragmented. Number two, Inchcape is a natural consolidator. And I'll show you there are internal and external factors we believe will accelerate consolidation. But above all, it's a huge growth opportunity for us. Let's start with a bit of context. You've seen this chart before. It's the 90 million vehicles that are sold annually, and [ 17 million ] of those are in typical distribution markets, which we call markets with a total industry volume and market size of around 1 million or less. We are operating in about 30% of those markets, and you can see it's a small sliver in that market. In fact, we sell annually around 200,000 cars in a target market of [ 17 million ]. Now you may think 200,000 cars is not a lot. And by the way, I wouldn't disagree with you. But this chart shows the top 50 distributors of all independent distributors where there are more than 1,000. And in that top 50 that you see here, you see in which markets they are active and with how many OEM brands they work. And 38 of those are active in less than 2 markets or in less than 5 OEM brands. And you can therefore see that Inchcape is truly the leading independent distributor by some distance. And you can also see that we have accelerated our presence since 2015 and we're now present in 36 markets with 41 OEM brands. This chart shows our all important OEM relationships that both Duncan and George spoke about. And you can see how they have strengthened in the past years. And I'm always impressed when I look on the right-hand side about the number of years I have to add. The flags on the chart show where we have been awarded new distributorships in which markets. And you can see that we have one distributorship with existing OEM partners. And at the bottom, you can also see that we have started to develop new OEM partnerships with DFSK, Stellantis, Changan, and most recently, as you saw in the video, with Geely. Now what's happened in the past years in terms of M&A? The first thing to note, and is very small at the top, is that between 2010 and 2015, we did not win any new distribution relationship. So it's only since 2016 that we started this M&A journey. And you can see a variety of deals on this chart, larger deals in multiple countries with multiple OEMs and multiple brands, but also deals like the example of Frank Wittemann in the video, where JLR in this case wasn't happy with the incumbent distributor and where we won a new contract on the basis of our capabilities. There's also a very interesting deal here in 2000, a first for us, where we acquired a national sales company, in this case, of Daimler. And then there's bolt-on deals, for instance, what you can see on the chart, Mini and Motorrad in Chile and Peru. In total, in the last 5 years, we've added GBP 1.2 billion of revenue in distribution, of which GBP 700 million in existing markets and GBP 500 million in new markets. Now to give you some examples of our track record of the acquisitions we've done, starting on the left. Indumotora was bought in 2016. It's about a GBP 400 million turnover business. It's largely a Subaru, Toyota, Hino business, revenues of about GBP 400 million, 4 markets. And we integrated that with our, at the time, relatively small Latin America presence of BMW in 2 markets. Now we generated GBP 15 million of savings in overheads doing that. But more importantly, it has proven to be the catalyst for a further Latin American expansion. In 2018, we bought Rudelman, the Suzuki business, in Costa Rica and Panama. This is another example of what we do when we acquire. We transferred best practices, in this case in Aftersales, to Costa Rica and Panama. And Suzuki recognized us in the global context, if you like, with the #1 and 2 position for both Costa Rica and Panama in this space. Then there's the acquisition of a national sales company. As I said, a first for us in 2020 during the pandemic, I may say. And this is really an interesting story because we started by establishing, let's say, a regional support center. But over time, we've won a further 5 distributorships, and we are now the leading distribution partner for Mercedes Benz in Latin America. In all those cases, we have retained and grown the talent. And in fact, if you were to take a look at our work chart today, you will see many faces of people that came with the businesses that we acquired in leading positions. Now what's different? What's going to change? We believe when you look forward, there are a number of external factors and internal factors will actually accelerate M&A. COVID has accelerated digital. I think the evidence has been shown in the previous sessions. It's therefore more important for OEMs, but perhaps also interestingly, independents have realized that they may not have the scale to invest in this digital. There's growing evidence, as Duncan said, that OEMs would like to work with less partners and stronger partners, and they need to focus their capital on CASE in the large markets. Internally and importantly, we have significantly strengthened our OEM relationships. Latest testimony to that is how we together managed the transition through a very difficult COVID period. And we've ramped up our technological and digital investments, as you've seen. But also, we've invested in our internal capability and not just centrally in terms of M&A, but also regionally because deals get sourced regionally and deals get executed regionally. And lastly, based on our significant strength in terms of financial position, we have enormous M&A firepower. So let's turn to our M&A framework. Strategically, looking for brands to expand our footprint and looking to expand geographically. And we've invested in our digital distribution platform, that is where distributors can plug their system into. Financially, we focus on markets with higher growth prospects. And also, we take a considered approach to valuing targets. We target returns where the project WACC is achieved within 2 to 4 years after acquisition. Organizationally, we focus on retaining and nurturing the talent, as I highlighted. And we have an ESG program that is very much to the liking of our OEMs. And lastly, we do find opportunities to improve the processes in the countries where we operate based on our own best practices and based on our strong governance, as referenced by Duncan. So this is our M&A framework. Let's look at the world of opportunities. And this is where you see the 17 million cars annually in the distribution markets that we focus on. And it gives you a number of lenses to look through. So on the left-hand side, you can see that about half the market is operated by OEMs still today, national sales companies, and then there's the independent distributors. And here you see the little slice that we have overall. Then you see that if it comes to working with existing partners, it's about half of the market. And then there's another half with other OEMs that we don't currently work with. And if you take the geographic lens, you can see that it's quite evenly split. So there is opportunities, and I stress that, in Europe, Asia Pac, Latin America as well as in the Middle East. And the far right-hand side just illustrates how fragmented this market is. You see that more than 1,000 independent distributors, and that's the case in each and every region. And from those, both the larger targets but also the smaller targets are of interest to us. Now if you bring it together from an OEM lens, we believe that our distribution proposition is actually very attractive to OEMs. From a market focus perspective, they have to focus on the biggest markets. We are the small and emerging markets' specialist. Technology, clearly, OEMs want to be at the forefront. And we've tried to demonstrate to you that our leading digital distribution platform is really responding to that. And from a capital perspective, and not just the financial capital, also the talent, they have to focus on CASE, and we can focus on building and growing their brands. And lastly, in terms of distribution footprint, looking for fewer and stronger partners. And Inchcape is the logical go-to partner given our size and given our global footprint. Now that's all very well set on my part. Perhaps it's better to listen to one of our OEMs, and we're very pleased that Matthias Lurs, who is the Head of Overseas for Latin America working with us, has a video for us, which includes some footage of local retailers as well. It's in Spanish. Don't worry, subtitles. And after that, there's a video of Ruslan who was the CEO of Americas and Africa before Romeo, and he was very involved in the acquisitions that I've described. And he's now taking that spirit to Asia Pac, and he'll talk more about it. So let's have the videos. [Presentation]

Well, I think you agree with me, those were 2 very, very exciting videos, right? So to sum it up, we are leveraging our scale and capability to drive consolidation. For the industry leader, we are a natural consolidator. We can see external and internal factors that will be a catalyst, we believe, for deal acceleration, with a good track record and invested in capability. And our strong financial position gives us a lot of firepower. Over to Duncan.

Thank you very much, Gijsbert. So let me wrap up. We've made significant progress since 2015. From 100,000 vehicles per annum, we distributed 200,000; from 28 partners to 41; and from 26 markets to 36 markets around the world. And we've not lost one distribution contract in many years, but we have added 17 in the last 5. Our data and digital capability sets us apart. We're a truly global business. We're broadening our footprint based upon a responsible business strategy inside Inchcape. And what does that mean when you put it together? We grow our distribution business. We grow it fast. We broaden into an existing markets and new markets with existing winning OEMs and new. So with that, let's move to Q&A. It's your turn to do some of the talking. So while we do a little bit of furniture removal, let's talk a little bit about how this is going to work. So if you could limit your questions to the topics we've spoken about so far, we'll do VLS and financial plan later. Those of you in the room, please raise your hand, give me your name, institution and question and then if you are participating online, please type your questions in and a wonderful [indiscernible] will read the questions out in the room. And look at that, as if by magic, we have the furniture all moved. Thank you very much, George. So microphones will come across to the gentlemen at the back, please. Thank you, Gijsbert.

It's Sanjay Vidyarthi at Liberum. I guess if we look at the big retail markets globally, then the focus certainly from a transaction perspective has been on the used car market, be it in [indiscernible] in U.K. Do you see that as different in a smaller distribution markets? Or ultimately, is your omni-channel capability about marketing and getting the customer into the dealership and transacting in the dealership and maybe you'll talk about in the second half that used car transactions online is going to be the more kind of the bigger area to explore in terms of omni-channel? And I guess kind of linked to that, how does DXP marry with the third-party dealer groups? If they're multi-brand dealer groups, how does it marry with their own omni-channel proposition if they have one? And then the final part of the question is, in terms of -- do you see any kind of -- do you expect any change in the physical footprint of your third-party dealer groups networks as a result of this omni-channel development?

Okay. Right. George, last question for you, please. Mark, number two for you about how we integrate with dealers. And let's see how Gijsbert and I get on with the first part. So look, I think it's a really good question. What I would offset the question is, I'll start with in terms of consumer behavior in the markets that we face into. Number one, without doubt, whether you happen to be in the Northern Hemisphere, the Southern, East or West, almost all journeys are starting online. And what we've discussed with you this morning is our core distribution business. It relies on exclusive relationships with OEMs to be able to run a market for them. So those 2 competitors that you spoke about in the U.S. and in Europe do not participate in that -- in distribution markets. Now do I see -- what does the future look like? Do we think that consumers will transact purely online? The research that we have, 30% of consumers are likely over time to want to complete their buying journey solely online. We just launched Subaru BRZ in Australia during COVID, and that was a good test to how we thought that would end up. 71% of our consumers had an online journey that finished in a physical retailer. The remaining 29% started online and finished online and will have delivery either to a dealer or straight to their home. Now we'll talk about VLS a little bit more in the next section, which will cover off more of your questions. Gijsbert, did you want to add anything to that?

[indiscernible].

Right. In that case, you get the pleasure of listening to Mark for a set moment. Mark?

No, it's a great, great question on the dealer piece because actually what we want to enable is the customer to do what they want, how they want to do it. So if they want to stay fully online, we support that. And if they want to actually go into the dealer as well, we want to be able to support that. So we have 2 modes of working with dealers. One is we can provide them with a portal that allows our journey to go into this if they're true multi-brand and don't want to fully integrate. The other is a set of APIs so they can be fully linked through. And you can start simple with the lead, and you can make it a more complicated bidirectional journey and bring Aftersales into it later. So we're on both, and it depends on the maturity of the dealer group. Some of the little independents are absolutely delighted when we go, "Would you like the portal?" They're like, "Happy days. That's great." Others, we actually want to properly integrate through the APIs. So that's the approach.

And the third question was about physical dealer network infrastructure. I suppose the first point to make is that physical infrastructure is definitely important for the customer and looks like being important going forward. We see evidence that for EV, those customers are more inclined to inform themselves in the physical network than online. So I think that's the base point. I would -- I think it will evolve over time. I think that, ultimately, there's probably some kind of future state where you have customer experience centers supported by Aftersales network. The pace at which we get there, I think, will vary by market and by brand. And there's a lot of work to be done cooperating with existing partners to get that experience [ in store ] correct before we stop thinking about major changes to the physical infrastructure. So I think it's several years off.

We have a question down here at the front from Andrew.

Andrew Nussey from Peel Hunt. A couple of questions as well, please. First of all, when we look at all the digital innovation, DXP, DAP, et cetera, it looks to me that's going to bring some real financial benefits to the group. I guess the question is, should we be think here about there's going to be a structural shift in the profitability and return on capital that can be delivered from the distribution model? Secondly, when we look at the landscape of the top 50 distributors globally, realistically, how many of those are actually accessible to you because of perceived conflicts of interest across the OEM portfolio? And thirdly, in terms of the technology innovation, how much better do you think it is than some of the national sales companies and equally your ability to then pick up sort of first-time outsourcing relationships?

Very good. So 3 questions. Gijsbert, if it's okay, 1 and 2 are coming your way. And then, Mark, if you could answer the third question, please.

Look, the first question was around, is digital going to fundamentally change the P&L shape of this company, if you sort of paraphrase it. I think that's perhaps a tad too far. I mean what is absolutely clear is, first of all, digital reinforces that this is a capital-light model that we have. And I'll say a little bit more about that in -- after the break. And equally, digital as an example, and I'm thinking about the digital delivery centers now for a minute, how we can drive efficiency on an ongoing basis, right? Mark has said that we actually get more for the same money. Of course, my challenge to him is to get even more for even less money. But there is just a continuous improvement, let's say, in our internal processes, right? I think the other thing of digital is much more into the revenue streams ultimately that you can derive from the information, and perhaps Duncan can even say a bit more about that. But it is really about the data that we have that we can exploit to improve our revenue base. So it's cost base and revenue base. I answered just the cost base piece. In terms of, let's say, the top 50 that you saw on the chart, and I agree with you when you sort of look at that, you're sort of amazed each and every time how fragmented this market is. I think there are a number even on those top 50 that could be credible acquisition candidates. In fact, in the Motorrad, as we bought it in 2016 would have been a bit to the bottom of that sort of top 50, but it would have been in that frame. And yes, there are conflicts to have BMW and Mercedes in one country, is not very likely combination, but there are equally opportunities where it is not that conflicting, I would argue. So there are certainly a few in that top 50, but I would also say that the others outside the top 50 can add up to big numbers, if you think about the thousands that are out there.

Very good. Thank you, Gijsbert. And just to come back on DXP and DAP. Look, they're doing many things for our financial footprint as Gijsbert said, but the big thing for me is the unlock it creates with OEMs. We lead in data and digital. They can see what we're doing. George and I were talking to the headquarters of one of our major OEMs this time last week. And they are blown away not only with functionality, but the pace that Inchcape has. You could see that chart in the market, where you see an incredible pace as we build delivery capability and that skyrocketing addition of markets and OEMs. So it's an unlock. And when they see -- when we talk about higher ARPU, that George spoke about before in terms of GBP 1,400 being a basket size, the fact that we're getting better leading to conversion rates, this is really impressive for OEMs, and we want that to remind them about that all the time, so they trust us with even more markets. Mark?

Well, I think the third question builds on that, actually. So I think what we've developed is a great platform for the Inchcape markets and the wider Inchcape proposition and where OEMs would like us to take on the entire market. It's fantastic. I don't think if this is what your question was leading to, we are not in the business of just being an IT services provider for the OEMs in their larger markets because our proposition is much more rounded than that. It's the people, the process and the technology. So I think it fits fantastically where we play. And of course, we talk to the OEMs all the time and we're sharing ideas, but that's the space we're focused on.

Okay. Thank you. Right. We're going to go send -- the rows by you now, sorry, in the middle, and then we'll come to this lady just afterwards, please. Thank you for collaboration.

It's Sam Bland from JPMorgan. I've got I think 2 questions, please. Again, sort of on that last point, your DXP or whether it's the new -- the other new innovations coming through, and you've got that rollout chart. How much of this is roughly developed one platform once and then roll it out to the 36 countries without? Or is there kind of quite a lot of tweaking and changing that slows the rollout that has to be done to rollout to new markets and not just in the context of DXP, but other innovations that might come through? And so the second question is when you're thinking about these smaller independent distributors, and all of this technology change that's happening in the sector, what are the things that they are finding most difficult to adapt to and all the things that you're doing, which is the hardest for a smaller independent direct [indiscernible] basically?

Okay. Mark, I'll come to you and then to George. So let me share a bit of background to why I'm pleased about the work -- that I'm pleased to be sat next to Mark, which is when you've done this for 30 years and you can see companies with a big legacy infrastructure, it makes them move really slowly. You can see that in financial services Europe about how slowly these financial institutions move. What we've been doing in Inchcape is eradicating legacy. We are moving our whole organization into the cloud, so we can actually move at pace. So we build once and deploy many times. The lead scoring machine learning algorithm, which Mark referred to before, we've developed that in one market. It is a machine learning model, so it depends on the data you see in each market, so we can deploy that into many markets. It locks up the data in that country and give the best possible outcome for country times consumer times for that brand, and we can move at pace and you do not move at pace that we showed you on Mark's Chart 4, unless you take that approach. The second thing I'd say is we are -- why are we working with some of the world's largest cloud providers? And why do they find it really interesting to work with Inchcape. It's because we're leading in the sector. And what we benefit from with working with people like Google, with Salesforce and Microsoft is they happen to be spending tens of billions of dollars on R&D every year, which makes their cloud -- their cloud platforms faster, more functional. And we are piggybacking on that to get ahead of our competition, even more than we would do with our own technology. Mark, I'll hand over for you to correct me on everything I've said on number one.

I would only try to build it. But no, I mean, I echo many times all of that. And I think the approach we've taken on this, particularly with DXP and DAP is a single code base. So that's how you get scale. But that's not trivial. It is easy to say and much harder to do. So we've gone from the one code base, you build the functionality. You then have to put the layer on top, which makes it work really well for each brand, because we represent some really important brands, and we have to make sure we can give the brand experience each brand wants. And then you have to layer the country customization on top of that as well because in each market, you have different currencies, you have different legal requirements, you have different payment requirements. So to that multidimensional model that we've built up, and that's why when we've got them in place, we can move much faster. It's also -- I will just add an advert for the DDCs. So by doing that with our people, they go through the learning curve once and then stay with us rather than working with third parties who typically churn people over more rapidly. So we're building the architecture, we're building the capability and then we're building the skills and the knowledge and the experience to do it ourself.

And I think the third question is what are the smaller independent distributors struggling with? I suppose if you go back to why traditionally, OEMs have appointed independent distributors in markets. It's all about the local hero, the person who has the connections, knows the infrastructure, knows the market and can take the brand to market. I think you only have to listen to my digitally native colleagues and the way they talk to realize that there's a real step-up in capability required to deliver this omnichannel experience. and a real step-up in financial commitment. And those smaller players just find it difficult to get into that space, either financially or from a capability perspective. I think we should still be a bit humble though, too, because as Mark showed in that chart, there are other scale distributors who are investing in this area. So we're not -- we think we're leading, but we're not on our own, but those smaller independent distributors. It's just -- it's a big step out of their sort of comfort zone, if you like.

Thanks, George. Just to add a little bit more to that. I was talking to a gentleman called Sebastian just a few months ago. And Sebastian's father started his distribution business, and he's been through the global financial crisis and everything has gone on since then and then hit COVID and came out the other side of COVID thinking, "Now we can get back to business as usual" and as a set of OEMs asking about driving omnichannel. And Sebastian said, "I just don't know how to do this." And particularly when you talk about the base that Mark referred to, which is it's built on great cyber capability, he stands no chance. He is to get back to father who is the winner. Next question, please. Back to -- yes. Thanks very much. So a great collaboration. This is really efficient.

I'm Sarah Wood from Mondrian Investment Partners. I just have one question for you today. Relating to your M&A strategy, where you find acquisition targets, do you compete with anyone at the point which you're approaching these potential acquisitions? Who is typically sitting at the table with you and possibly competing for that opportunity?

Okay. I'm going to go to my Dutch colleague for this.

So look, we've taken quite a systematic approach. So we have a real funnel, if you like, targeting and scanning the market, first of all. And it's certainly not without competition. I would say that -- so there are other regional players, if you like, that we find. I think what I would also to be clear about, we're not finding ourselves in private equity-like auctions, right? There's a beauty to what I call it sort of takes 3 to tango, right? So you need the OEM to be willing to giving his business, his brands, frankly, to someone. You need a seller and in this case, the third one is Inchcape. And that process doesn't really allow for a -- let's go for the highest value auction-type process. So there's a number of situational factors that come in. I mean, clearly, the capabilities that Duncan spoke about. And there is definitely an element of price, but it is only one of the factors. So we are finding ourselves in a competitive field, but we have other ways and money, let's say, to distinguish ourselves.

Thanks, Gijsbert. And if you look at the Geely relationship we signed just a few months ago, why was I pleased about that? Yes, it was competitive. They chose us because we really understand that market in Chile. We know consumers work. We have a great digital platform. We happen to be automotive distribution experts. But then you'd see the way the thing that pleases me most was the Inchcape team collaborating around the world. If our team in Asia Pacific, who can speak Mandarin to Geely coupled with a team in Chile that knows that market inside out and back to front, makes us a compelling partner. Let's move to the next question over here, please.

It's Mike Allen from Zeus Capital. Just a couple of quick ones for me. Just on the digital architecture that you've spoken about. I assume that's lent itself to an agency model and if the OEMs wants to go down that route or not, if they don't, there isn't a lot of adjustments that might need to be made in that transition. That was the first one. And then just on the margin opportunity, perhaps with F&I and how easy is that to get consistent across all your territories given the change in regulatory environment? Just to explore that a little bit as well.

Okay. Thank you. Thanks very much, Mike. I'll take one, and then George will be coming your way for finance and insurance. So look, the first thing I'd say is in our distribution markets, it's Inchcape that our OEMs trust to make the decision as to whether we should introduce agency into those countries or not. So that's the first thing. The way we're building out our DXP and DAP technology is that it's more than capable of moving to an agency model. But it's not the big game in town. The big game in town is deploying the functionality, driving performance, as George showed you, Mike, on that slide before, and impressing our OEM partners to the point where they want to give us more and more markets. That's the really big game in town for us. I know some of our OEM partners, of course, have a different game in their pure -- their retail market, they manage themselves. But for us, the big thing is deploy the technology, knock the ball out the park from a performance perspective, impress the OEMs so they give us more markets. But in the markets, we run, we make the choice as to whether they are agency or not. George?

So I think there's 2 opportunities around F&I. There's -- across the world, we have varying rates of penetration in the traditional sort of F&I model. And I think good discipline and good process should over time improve and it has done, historically, improved our penetration on that level. I think the other opportunity going forward in F&I, and it's something we're investing in, is the ability to introduce new innovative products like PCP. So currently, we only have PCP in 5 of our markets globally, and we're building out the capability to be able to deliver that in other markets. That reduces the ownership cycle for the customer. So what that does is actually increase the number of cars you're able to sell over a period of time. Now it typically takes 3 to 5 years for that to return because that's when you're shortening the life cycle there. That's the big opportunity as a distributor. But that takes time and expertise and internal capability to build and roll out, but we're investing behind that.

And then, Mike, I'll add a couple of things and Gijsbert, maybe you could comment on this. We've just launched in Australia. So it's a big market for us. The Australian market is, depending on the total industry volume in the country, somewhere between 36,000 and 45,000 vehicles for us. So we've just rolled out F&I into Australia, something we've been trying to do for some time. The early results are very, very promising. And you'll be worried, Mike, that we're taking balance sheet risk, which is why I want Gijsbert to just to clarify the last part.

Yes. So Australia, Subaru that we work with don't have their own finance house. And frankly, one should go outside of the room with banks are not very innovative in Australia. So we found a JV partner who actually does the front end and has a platform, and by the way, we can add that platform onto our DXP platform, as you would expect us to do. And we both put some money in, but the base funding still comes from those same banks, and we go in between. So we keep it capital light, with very good risk management around it. I remember a little bit of that from our lease plan base and how not to like cars, there is a residual value that is going to come after you. And fundamentally, by the way, PCP products with the customer doesn't carry a lot of risk in that sense if you do it well. So it shows that with a little capital, you can actually massively expand. We set it up in Australia and there are other parts of the world where perhaps our partner auto banks need a more innovative solution to get the PCP story out wider in the world.

It's Georgios Pilakoutas from Numis. First one, we've seen in the U.K., every dealer has now got kind of an end-to-end solution. They can kind of let you check out online, they also kind of do home delivery. So just since how local operators that aren't part of the Inchcape Group are dealing in some of these emerging markets, what are the solutions available to them? Or do you think that perhaps there's more of a shakeout in a couple of years once the supply-demand balance starts to settle? Second one is consolidation. We saw lots of deals in 2020. Here in 2021, despite kind of you talking about seeing more rational multiples out there, so I guess, why do you think that is? And kind of what is the outlook from here? And then third one might be more appropriate for later, but asking about incentivization for both C-level and kind of regional management, it feels like there's a lot of kind of new initiatives going on. So how you've updated that is kind of M&A within part of that incentivization package, for example?

Okay. Georgios, just remind me of question 2, please, because I was writing like crazy, I didn't...

Sorry. Lots of deals last year, fewer this year despite kind of multiples seemingly in a more sensible place and you've got more cash on the balance sheet.

Okay. Understood. Thank you. Mark, can we come to you first, please, on the U.K. dealers technology?

So I think -- I mean the U.K. is different to the wider distribution. Close to what we were looking at with DXP was for a distribution market as opposed to the U.K., which is a retail market. And then we're largely in markets where there are current aggregators or perhaps a sort you're referring to. We do -- to the earlier comment, there will be some of our -- of the independent dealers who have their own solution. Now we'll just integrate into that and work with them. In a lot of the conversations we're having with them, we are already bringing something that is way in advance of where they are because those markets are where the U.K. is. So we're bringing something to those markets.

I guess my question was in more [Pendragon], they're also offering home delivery offering kind of finance online. Local independent dealers in emerging market countries also. Do they have those capabilities? Or are you kind of expect...

Much, much less so. I'm not going to say no to all, but much less so, and so we're actually bringing something that is helping them accelerate their digital play.

Right. I think the other question was around deal volume in 2021 to make it very specific. So look, I think -- so firstly, you've seen actually we did accelerate a lot and until COVID hit us. I mean, we've always said that we to do large deals without having seen the business on the ground to property diligence, right? And as you say yourself, the valuations, particularly during COVID, were very hard. People weren't really intent on selling. In many cases, those are multi-decade -- sorry, multi-generation family businesses. So valuation point was certainly impediment. And -- but what I -- so what I can say to you when sort of the first wave or second wave or wherever we are in COVID sort of started to recede, we saw, let's say, our pipeline really expanded. But all of those deals do take time, right? Because it is inherently complex with the 3 partners. It is inherently emotional for some of the independents to sell. So of course, I would love to give you ABCD, right? I think what you can take from our stance today is that, firstly, we are fundamentally optimistic, and we're not saying lightly that the pipeline is attractive. But at the end of the day, the timing and quantum of deals is just unknown, right? So I'm not sitting here in any apologetic way. We stand by our valuation criteria. I know it's become more active. I know the structural factors are working in our favor. And I wouldn't say watch this space. We are clear that we need to put some numbers on the board for this to be really appreciated, right? But there's nothing specific, I think, at this stage that this has been a deal impediment. In fact, I'm quite proud of our activity. But anyway...

Look, I'm with you, Gijsbert. I would say -- what would I said, what the deals we did during 2020 tended to be single market, single OEM because in terms of being able to do the right level of due diligence, and we do want to do the right level of due diligence, getting out to multimarket across multiyear OEMs was and is too risky. What do we see now? We see -- and we had some crazy multiples on the bigger deals, right? Well, I think I've said on a number of occasions that I saw software multiples for car distribution businesses that just really doesn't work. It might have worked in my old life, but not in my new life. Now where are we now? Multiples are becoming much more sensible, and there are bigger deals available, which are multi-country, multi-OEM. We will do the right level of diligence on those deals. We'll maintain our financial discipline. And what I would say is we are not forced buyers. And the great thing about being in Inchcape, the stuff you've heard this morning, we're at the table every deal. We pick our deals, and we'll -- and I think with what Gijsbert showed you this morning, we'll make some deals happen. No forecast as to when, but we'll make the right deals happen for the company. We then -- you had a question about incentives. Look, I mean we'll take it head on, right, which is I am not a sole believer -- people in our company only do what their financial goal sheet tells them to. We pay them a base salary to behave properly and live the values of our global -- and live the values of our global organization. I am much more of a person who wants to engage people in what we're doing. If you look at the Accelerate name that you saw coming up earlier today, that Accelerate name was not chosen by the people in this room. The Accelerate name was chosen in a vote of our top 400 people around the world. We engage them. We engage them in our strategy, and we know from doing that, you get people's logic and their hearts to help drive our strategy forward. That said, I have used the management by objectives part of people's short-term incentive plan this year to drive our Accelerate plan, and we'll do so next year. But the overall financial structure of people's incentives is just what you'd want them to be, reinforcing our proposition of capital-light, high returns, highly cash-generative business, and that's the way we'll continue to push our incentive schemes. But people do what managers ask, not just what is what on their goal sheet.

It's James Zaremba at Barclays. I just have one maybe clarification on -- following Mike's question, just about, I guess, the greater responsibility in terms of digital for a distributor, and I guess the money you're investing, whether it's in 500 heads and how that works with kind of the retailers. And I think you were saying Duncan and actually there's not a huge change in how you, I guess, manage the profit share, but just how that is working? Are they getting stuff for nothing, for example, high ASPs, low inventory, all these things help them, so how exactly is that being worked out?

Okay. Look, let me make some comments on it. See if George can follow up a little bit. Fundamentally, we're trying to put technology in place that enables our dealers to be incredibly successful. They are really -- our research says they're really important in customer experience. So when a customer of ours in one of the markets, where we represent our OEMs, goes into a physical retail space, we want the experience to be knockout. So we are providing them with tools and technologies that enable that to happen that are integrated with the overall omnichannel journey that a customer will take in a country. Could we squeeze some more margin out of our retail partners in each of the markets? Possibly. But that's not the big game for us. The big game is incredibly successful dealers in the countries that want to work with Inchcape because they personally have the best experience from us and to deliver knockout performance of our OEMs want to give us small markets. That's a really big game. George, do you want to add anything to that?

Someone earlier -- I think Mike -- mentioned the agency, which is a way to force change, I think. We're not about that. We've got the sort of strategic asset, I would say, a vertically integrated retail. So we can try and test these things and get them right and prove out the advantages and then work with our independent network to get them to take on board the solutions that we have. We've started doing that, and the reaction is extremely positive. We haven't led with a bonus change, an incentive change. We've got them coming on board. I think over time, we'll ask them to change the nature of their teams and the way they do things. So there's a lot of change management to do through this. And I think getting -- as Duncan says, getting too hyped up about the financial consequences of it. As long as it's affordable for us is not the place to start. So that's sort of our -- we're progressing in.

Very clear. Okay. So we have time for -- have there any questions coming?

[indiscernible]

Even right now, needs a microphone.

So 2 questions. One is, can you talk us through how the conversations you've had with OEMs has changed over the past decade? And then the second one, again, on consolidation, how do you view distribution opportunities outside of Americas, which is where it's clearly been concentrated to date?

Okay. Thank you, [indiscernible]. By definition, George, the first question must come to you. And Gijsbert, you are getting the second.

Yes, keep [indiscernible] . They've changed completely. So I think if you go back to 2008-2009, we just come out of major expansion through retail. And at that time, the OEMs were absolutely all about keeping control of distribution contracts wherever they have them. If there was an incumbent, they were sort of reasonably happy to leave it there. It was the independent local hero, but they were not interested in any way about expanding the independent distribution network. They felt like they needed to own the customer, own the brand, own the experience. So we chose to grow through retail acquisitions, so Russia, Baltics, et cetera. Obviously, then the GFC hit and we had to get ourselves back to a position where the share price is where it needed to be. There wasn't a great deal of activity at all. Stefan then came on board and started to reengage with the OEMs and distribution players about acquisition strategies. Now initially, Indumotora and Rudelman were us acquiring existing independent distribution businesses. So whilst it was approved by the OEMs, it wasn't necessarily encouraged in the initial interaction. That has flipped quite considerably in the last 3 to 4 years. So the example of JLR in Poland, that is JLR asking us to step in and take over an independent distributor. The business, Mercedes in LatAm is about Mercedes exiting an NMSC and handing it over to us. So the points we're making about how the OEMs are having to invest so heavily in EV that they are increasingly clear in their minds that they cannot support this move to an omnichannel experience, which is their second highest priority in all markets. They can probably do it in the big markets, but they can't do it in a smaller market. So increasingly, when we talk to them, they see us as a real partner of first choice able to offer and deliver those solutions. And when you're a Daimler and you've seen what we've done in LATAM, that starts to get them really motivated about what you can do elsewhere, because having performance runs on the board is how you really get the credibility.

I guess that's the thing that hasn't changed. You have to perform. Gijsbert?

Yes. So a fair question on Latin America. If you look at the bigger deals, I mean, clearly, they happened in Latin America, as I illustrated. It's not like we've not done deals elsewhere, right? So the example for instance, JLR in Poland, that's about 100 million operation. In fact, a contract win in Poland, right? And by the way, you should also think about Europe as a growth market. If you think about modernization rates and the way Poland is growing is actually fantastic. We've also bought a smaller BMW business in the Baltics. We've also expanded in Africa. We are, in fact -- the Eastern part of Africa, we're expanding from Kenya into other markets in East of Africa for JLR as well as BMW. And yes, today, those are small numbers. But clearly, if you talk about the longer term, they're there. We have JLR Indonesia, right, added to the stables in Asia. So it's definitely that we have our focus in other parts of the world. And I think when I look at the pipeline that we are having now, it's actually more balanced is what I would say.

Very good. Thank you, Gijsbert. Right. Thank you very much for the questions. Could we be back, please, as we break at 25 to the hour. See you in a few moments. Thanks so much. [Break]

So thank you very much for coming back. It must be the promise of fun with the Inchcape team after the next couple of sections that's done and I can say a number of people nodding to that? Or is that -- no, those are shakes of the head, I do apologize. Right. So we are now into a part of the agenda where we want to talk about vehicle life cycle services. Remember, this is Inchcape taking a greater share of the profit pools across our vehicle's entire life. We spoke about distribution excellence just before the break, us biting our way into more of those 17 million vehicles. Now we talk about vehicle life cycle services. Now we have been focused -- since we spoke to you in February, we've been focused on 3 game-changing opportunities for Inchcape in vehicle life cycle services. Used car listing platforms, a digital parts platform and a multi-brand used platform. And we've taken them all through the same process, a forming well thought through ideas that we test in a single market. We test the consumer reaction. We're testing for our business model. We're testing our technology and of course, we're testing the financial performance before proving them in more markets. And in the case of our multibrand used platform, tested in multiple markets to a place where we like the business model, our consumers like it, and we're ready to scale that globally across our operations around the world. There are other things that we have at the idea stage, we are focused on these 3. And what I'll do over the next few slides is I'll give you some background and some data that gives us more insight into what -- how the market works and the scale. And then I want to take you through our digital parts platform and our multi-brand used. Now I believe that Inchcape is uniquely positioned to take a greater share of our vehicles lifetime. The first thing I would say is that this is a significant opportunity to capture more value and at the same time, by the way, to capture more customer value, not just the profit pools around the vehicle. The profit pools in VLS are more stable and offer greater returns, and our existing capabilities in the market that Inchcape has gives us a competitive advantage. You also know that many of the markets Inchcape is in are emerging markets. And if we can build out our VLS propositions in those emerging markets, it gives us the opportunity as those markets mature and scale to take a major share of a vehicle's lifetime value. And I hope you know from talking to Mark just a few moments ago in the last session that we know how to build software, and we know how to take advantage of data and digital when we deploy it into our markets. And that brings us closer to adoption across the whole of the value chain in vehicle life cycle services and the aftermarket and in used vehicles. Now you will have seen the slide kind of on the right-hand side before that just reminds us that 75% of the profit in a vehicle happens after the first use stage. In other words, when it's more than 4 years old. And the patent that Inchcape has in the first phase of a vehicle's life around the sale with metal margin, finance, insurance and then the ongoing aftermarket is what we want to repeat in the second phase and third phase. Now what we've done here is, and we were talking this being more stable and offering higher returns for us. On the left-hand side, you can see that we've taken 3 global crises, and we've analyzed what happened to new vehicles, used vehicles and the aftermarket. The 3 crises were the '90s rate hike, the dot-com boom and bust and the global financial crisis. And you can see the pattern is quite clear in each of those crisis which you see aftermarket and used vehicles having less impact than happened to the new vehicle marketplace. On the right-hand side, we look at dealer economics, and you can see the gross margins for a dealer in new cars, used cars that are franchised, used cars multi-brand and then, of course, the aftermarket a greater than 50% gross margin. And if I'm really honest with you, I don't really mind if listing platform is 70% gross margin or operating profit, it's still a lot. So more stable, higher returns, and we're advantaged by our existing capabilities and resources. In our networks around the world, we have the ability to source from those from -- directly from those networks. We have the data to enable the right valuations for those vehicles. As George mentioned around operational expertise before, because we have to think of vertically integrated retail in our distribution businesses, we know how to operate, and we've been doing this for decades. And on the right-hand side, applying technology to the data that we hold means that Inchcape can buy vehicles at the right price and sell them -- and importantly, sell them at the right price using data and analytics. And then in terms of our infrastructure and partnerships in market, we already have refurbishment capabilities, logistics, the right partnerships in terms of finance and insurance and OEM relationships and relationships with third-party providers of consumables, parts and tires. And let's not forget, bottom right-hand corner, those really important things called customers. Trusted relationships with customers in our 36 markets and a deep understanding of how those markets work. Now we've mentioned a few times today about the concept of motorization rate, and this is the point about the unique footprint that Inchcape has. Motorization rate is the number of vehicles per 1,000 people. On the left-hand side of this chart, you can see developed markets. This is an aggregate across the U.S., France, the U.K., Germany and Japan, 700 vehicles per thousand. If you unpick this a little bit, you find out that the U.S. is just over 800 vehicles per 1,000 people. The average for Inchcape market is 446. Crucially, the markets that we brought on since 2019 -- since 2016 is 196 vehicles per 1,000 people. In some of the markets we brought on, in Africa and Latin America, the number is less than 50 vehicles per 1,000 people. Now what does this mean? Well, we see GDP growth coming through these markets that we're in, individuals become economically empowered to buy their first vehicle. And from that, the new distribution business builds. And you heard before the break about what Inchcape is doing about that. But then the used car market builds. It builds -- it gets professionalized, it ends up as a multiple of the new car market. This is an opportunity for Inchcape to build out vehicle life cycle services businesses as these economies emerge, so we take a bigger market share as they become larger markets. And don't forget some of the markets, we're going to take Indonesia, for instance, 270 million people, motorization rate below 50. It will be bigger than the U.S. in a few years' time in terms of population. Now we need to confess something, don't we, on the left-hand side of this chart, which is the automotive industry, it would be fair to say, has lagged other industries in terms of digital adoption of e-commerce. On the right-hand side of this chart, you can see about e-commerce penetration of general retail sales. And the light blue blocks are across all markets, general retail penetration. You can see North America and Asia Pacific at around 1 in 5 transactions are purely online. Then look at where the Inchcape markets are, lower digital penetration. But what we do know for certain, and we can see that in our distribution businesses, is a rapid rate of digital adoption in Inchcape's 36 markets. So what does all that mean in terms of what the 2 opportunities that we're showing you today. The first one I want to talk about is our multi-brand used platform. Inchcape using its digital capabilities and its omnichannel capabilities to break into more value across the vehicle's life cycle. Well, the first thing to say to you in the topic of used vehicles is what we told you in 2018, the company has improved its performance in used cars. What we show you here on the right-hand side is that our ratio of used to new vehicles has improved by about 20% in 2017 through 2019. We're not going to get confused by what's happened in '20 and '21 because of COVID. And that's been a broad-based improvement. You can see in the U.K. and in Russia, we're almost 1 for 1 in terms of new to used vehicles. But we have seen improvements also in countries like Belgium and in Chile, but you can still -- you can see the ratio between the 2, although it improved significantly, still has some way to go. So this group has performed in this regard. The next thing I want to talk to you about is how big is our target addressable market, not in some theoretical European number or Asia Pacific, but in the markets that Inchcape is in. We've broken out the market in each country by the business to consumer, exactly where you think Inchcape should play, and consumer to consumer. And if you look at the right-hand side of this chart, you can see that our target addressable market is 14 million vehicles in Inchcape markets. And we have the capabilities to compete, the right market presence that enables us to source used vehicles with the right partnerships, 50 years and more of operational experience. And then the technology and data gives us the ability to buy at the right cost and to sell at the right price and do so dynamically using data and our digital capabilities. And we use our global scaled platforms to make sure that we're incredibly efficient when we attack this market. Now before I tell you a little bit more about this, I'd like you to hear from Glafkos Persianis, who runs our Europe market. [Presentation]

Hello. I'm Glafkos Persianis. I joined Inchcape in March 2020, and I'm the CEO of the Group's Europe region. Prior to joining Inchcape, I held a number of roles at Vodafone. Lastly, as head of the U.K.'s consumer business and head of all the U.K.'s customer operations, with the responsibility for brand, proposition, customer value management, advanced analytics, digital, retail and call centers. At Inchcape, I have end-to-end responsibility for our European operations. The division is a GBP 2.5 billion revenue business, spanning 13 markets from Greece through to Poland and Russia with more than 4,000 employees. Across these markets, we act as both distributor and retailer for a broad range of brands, including Toyota, Lexus, Jaguar, Land Rover, BMW, Mini, Ford and Mazda. I joined Inchcape because I was excited by the Group's strong growth potential and in particular, the opportunity to build the business across the Europe region. Everything I see in our accelerated strategy makes other opportunity even more compelling. I believe Accelerate will enhance our opportunity to grow as a distributor of choice for our OEM partners. It will see us expand both our geographical and our OEM footprint across Europe. One key driver for future growth is digital and omnichannel. And I am delighted that this is so central to Accelerate. Our customers are interacting increasingly online for part the role of their customer journey. We must ensure that we can service them across both the digital and physical world in a seamless way, offering them a fantastic customer experience. In the last year, we have started to roll out our new digital and data analytics capabilities in Europe, and we are already seeing positive returns from this. These returns will only increase as we further embed and accelerate these new capabilities and ways of working across all of our markets in Europe. Finally, an area of great potential across Europe is vehicle life cycle services. Across the markets where we are present in Europe, the used car market represents more than 10 million units per annum with a strong retail and logistics footprint, in-depth market understanding, strong relationships with our OEM partners, attractive customer propositions giving us great access to used car supply and strong digital know-how to tap into this potential, I believe Inchcape is very strongly placed to capitalize on this exciting market opportunity.

Thank you very much, Glafkos. You were great. Now -- Let's talk a little bit about -- more about this business. Now as a business person, I'm looking for the low-hanging fruit when we start these new businesses up inside Inchcape. And on the right-hand side, you can see what happens today in our company. There are 30,000 vehicles that we send straight to wholesale out of our retail operations. 30,000 vehicles that we miss out on all of those guys, finance and insurance, metal margin and the aftersales market, of highly profitable after sales market. So 30,000 vehicles on the right-hand side. Now let me give you some examples of what we do. Take Australia, for instance. You can see that for younger vehicles, under 3 years of age, we may immediately re-retail those. But as you move into vehicles that are more than 4 years old, we send almost half of them straight to the wholesale market missing out on that opportunity. In the U.K., you can see a similar pattern, only for vehicles beyond 3 years of age, almost 2/3 of them go straight to the wholesale market. So on this slide, you can see, we should take advantage of the low-hanging fruit that is presented to us by those 30,000 vehicles inside the group today. But our ambition is not limited to just 30,000 vehicles. We have been testing in some of our markets about how we might buy from other sources, sources of high-quality vehicles into our network that we can attach those high-margin recurring revenue streams of F&I and aftersales, too. So if you take a look at our Russian team. In 2017, we only resold the cars that we had as trade-ins. But as you can see, as we move through 2020, the ratio is about 1:1 in terms of how we're sourcing vehicles to bring into our used car network. You can see a similar pattern in the U.K., where we have been increasing our volume of direct from consumers and reducing our percentage that we're getting from the wholesale market. So we've proven our ability and we're using data and analytics to be able to buy at the right cost, I've said this a number of times, buy at the right cost and then dynamically trade at the right price to maximize Inchcape's margins. Now this slide, we should take some time on. This is how the buyers of used vehicles behave through their buying journey in mature markets. 94% of them start their journey online, and I can see many of you saying, "Didn't you say that earlier on?" And that is true. So the first phase of the journey looks like the new car buying journey people start online. But as they move to the next step, 69% of those people end up on the dominant listing platforms in that market. Those of you who are in the U.K. will know that the U.K. has Autotrader. I was in Romania with a cracking Inchcape team 2 weeks ago. And in that market, it would be autovit.ro or mobile.ro where you will end up. So 69% of this 94% end upon those dominant listing platforms. And then you end up on Inchcape's omnichannel. You may argue they may end up on other people's omnichannel. But it's the ability for Inchcape to form great relationships with the dominant listing platforms in each of the countries that gives us a low-cost source of high-quality leads for the vehicles that we have. And you know from what you saw this morning, when we get them into the Inchcape omnichannel, we have great engaged traffic, and we convert more leads and we have higher average basket sizes. Please note, we are not going to set ourselves up with a huge A&P budget for marketing expenses to create a brand here. We do not need to. We need to leverage the dominant listing platforms in each of the markets that we open our used car business up. It's a crucial difference between us and other players, is how we work with the listing platforms in each of the countries we will open up in. So we should tell you what it is that we've been doing. So in a moment, I'll play a video for you. Inchcape is deploying a digital omnichannel to enable us to re-retail those 30,000 vehicles plus the vehicles that we buy directly from consumers and other sources around the world. So let's play the video, please. [Presentation]

Right. Thank you very much. So I want to say thank you to Katie and for Glafkos. The reason we put Glafkos' video in this section was that him and Katie have had these -- this facility up and running through the majority of this year where we've been proving and testing the business model. I think 3 markets for Glafkos, 1 for Katie in the U.K. And any of you are trying to now search for autobravo.com -- co.uk, we turned the site off for today because I wanted you to concentrate on what we were saying, I do apologize. It's Mark's fault. So that is autobravo. Let me tell you a little bit about what we're doing. The right scale in our business and the right scale for low-cost lead generation using our data, our algorithms to buy and sell, our omnichannel and digital capability and the right market presence, our facilities and infrastructure in-market with the ability to source and let's not forget those high-margin revenue streams of finance and insurance and the aftermarket. On the right-hand side of the slide, you can see that loads of stuff the highs that we're really interested in. But it's the stuff that I'm interested in, and it's exactly what you'd expect from Inchcape. Capital-light, high returns, highly cash generative and that's what this business is. So let's give you an example of where we've had this up and running, which is another 1 of Glafkos's markets. What have we seen as we've deployed in that market? An improving gross margin picture. Note that we stop at 2020, not the incredible used car valuations that we are currently seeing. We're basing this business on used car margins as they were, not as they are currently. That's a really, really important point. Very low overheads, 50% compared to a new car operation, fast payback. We're turning the stock in 30 days. This year, we've been allowing us to turn the stock less frequently because actually, when you put a car on the fourth quarter, they are going up in value at the minute and that suits us to do it, but we're clever about how we're doing it. And you can see on Yandex, which is the Russian version of Google, our feedback for consumers is very good. And that's what we're seeing in each of our operations. Let's talk a little bit about financials, should we? So target addressable market, 14 million vehicles. There are 80,000 vehicles that Inchcape has in its used car operations today that we sell. We add 30,000 to that number. And of course, as we grow our distribution business, as we told you about this morning in what we're doing, that 30,000 number will increase as a function of that. We purchased direct from consumers in other ways at least 50,000 vehicles or more per annum to double our used car operations within 5 years. And in doing so, generate an incremental GBP 100 million of gross profit. So that is autobravo. That is our used car operations. I think you can see very practical, aimed at maximizing Inchcape's footprint and building out vehicle lifecycle businesses, some of these emerging markets whereas those markets mature, we end up with a way bigger market share than we think of the 1% on the top of this slide. You will no doubt be interested in timelines. So we have proven the model in a number of markets. It's good for -- the consumers' feedback is great. We like the way the financials work. We like the way our digital channels work. We launch that, you will actually be able to go to the website next week. We launch that next week. And then we will take that to each of our operations around the world. They'll go into Asia Pacific, they go through numerous markets in Europe and into our Latin American operations. Let's move on to talk about digital part, should we? So let me give you some background to the way we're thinking, and then I'll talk a little bit more about the parts market. We are clearly very -- well, actually, there's 3 things on the slide, I should say. The first thing is we clearly are driving retention of vehicles in the second and third phase of a vehicle's life with our OEM partners in each of our 36 markets. And by the way, we are getting great support from our OEM partners to do so. We will penetrate broader than the OEM network into the parts market. Autobravo is a good example of that, but we'll penetrate more parts as a result of us having our VLS business for used cars in bravoauto. But then there's a big opportunity in taking -- to digitalize the way parts are distributed in the markets that Inchcape faces into. So let's talk a little bit more about the opportunity. Now we talk about TIV, which is a number of new vehicles sold every year. And we've given you 4 examples of Australia, Colombia, Belgium and Indonesia. And the way this chart works is the light blue talks to you about the number of new vehicles sold every year in each of these markets. You can then see the used car volumes. So let's take Australia. 1 million new TIV, 3 million used vehicles sold every year. But the car park is 20 million vehicles. In Colombia, you can see a similar pattern, only this time, 30x more vehicles in the total park than a sold new every year. And then you can read the Belgium and Indonesian figure yourself. This is a significant untapped market for us. Let's look at the global market and how that pans out. So by 2030, we think this market will be $1.4 trillion. The markets that Inchcape faces into will be $0.5 trillion by 2030. It is highly fragmented with some very old fashioned business practices, and the profit stream is highly attractive. Let's talk a little bit more about how the value chain works. So a little bit like we showed you for our distribution business today and our retail businesses and how they work with consumers. Let's talk about parts. You can see from parts manufacturers to distributors through to workshop to customers is how this value chain works. We are clearly present today, working with our OEM partners to take parts into franchise dealers and into some of the independent networks, but we miss out on 65% of the volume here and 70% of the volume there. When you look at the independent market, we want to break into more of this independent market in each of the countries we operate in. Let's talk a little bit more about that. So this is not typical of every single market, but it's typical of less mature markets and where the parts business is transacted in a country between these small workshops and through the distribution chain, and sometimes the small distributors moving into big distributors. This is very manual, very little technology, lots of phone calls, lots of paperwork, in some case, fax between different locations to facilitate the distribution of parts. What Inchcape is doing is building a platform technology, which enables this value chain to work way better than it does today. So not Inchcape as a holder of stock, not Inchcape as a logistics partner, but Inchcape as a technology platform that facilitates the whole process and has an e-commerce facility to facilitate invoicing and cash collection. The beauty of the system is that as a small workshop, you just put in the vehicle identification number, and it tells you exactly the part number you need and enables you to order it online, as opposed to looking through the millions and millions, and in some cases, hundreds of millions of part numbers for just 1 particular model over a number of years. So Inchcape builds a digital platform that enables this whole process. You'll be wanting to know how we make money. We make money on commission on the parts sold through the platform and the opportunity to offer parts manufacturers marketing facilities on our platform. It fits the usual Inchcape model, capital-light, great margins, great cash flow. And what is required to succeed in this marketplace? You need great OE automotive relationships and experience and you need the technology expertise to be able to do it. Now let's talk about our timeline in terms of our digital parts platform. So we have tested this out already. We've tested it in Asia. We tested it out in 2020, in the first 6 months of 2021. It was one of the gifts that George brought back this time in Asia Pacific when we built out our strategy. So we've tested it for independent workshops and distributors, the feedback is really good. Now what we're doing is we are now built -- completing the build-out of the technology. We will do that during 2022. And then we'll start to scale that and build it out in our market sometime around 2023, maybe 2024, depending on we find adoption of the technology platform and further development we need to perform. So not ready for launch yet. But our previous platform that I showed you around used vehicles is ready for launch now, and we will scale it. This will come a little time after that. So let's summarize where we are with the VLS. It's a very attractive segment for us to go after, high margins, high returns, stable business. Bravoauto, we launch next week, and we roll that out at markets around the world. Digital parts, '23, '24; and we will come back to you about where we are with our listing platform during 2022. So let's wrap up where we are in this. We think we're uniquely positioned to take more of the lifetime value of a vehicle, strong OEM relationships that we are leveraging to improve our business with OEMs. We have the right footprint. We are globalizing autobravo. We will drive up retention rate of parts. Our digital parts platform will give us access to parts that we do not reach today, but a high -- but large market, highly profitable. And net-net for us, we end up with GBP 50 million incremental profit from our vehicle lifecycle services business within 5 years. So that was VLS. Now for the exciting bit. Gijsbert is going to talk you through our financial framework. Gijsbert, over to you.

Right. Well, I'm quite excited by vehicle lifecycle services as well, I have to say. I hope you are, too. So this is the last part before the Q&A, and let me take you through the financial plan, how it all comes together. And as always, I'd like to start with a bit of context. So take a look at this slide, take a look at the middle bar. Here, you see a pro forma of 2019 and just compare that to the left-hand side and see how we have transformed the portfolio of this business. We have reduced our exposure to retail from GBP 4.2 billion to GBP 2.8 billion. And we've added GBP 300 million in distribution. And distribution is where all the exciting growth opportunities are in terms of top line, in terms of margin, in terms of cash. Also, during COVID, I think this business has proven once again its resilience. If you look at revenues, you can see that we have almost recovered to 2019 levels. And if you take profitability, that has been supported by the decisive COVID restructuring we undertook, which is now supporting margins and will do so on a go-forward basis. So this business is ready to capture on the attractive growth opportunities, and it is stronger than it was before. This chart shows those geographic growth opportunities, and I know it's a bit of a busy chart, at least to my taste. But when you take a look at it, you can see this is a geographically diverse business. And we are exposed to markets with higher growth, higher than the global average, which is underpinned by the low modernization rates in the markets where we operate. And when it comes to margins and distribution, there is upside in most of our regions. The retail operating margin today is very much helped by the imbalance between demand and supply. But what I would say about it is that we've made it a substantially stronger business than it was before. So in summary, geographically diverse with a meaningful upside. Now let's look at the growth drivers in distribution excellence, starting with top line. First one is volume. Obviously, we are dependent here on market developments where we are exposed to those higher-growth markets. We aim to outperform that, and we think we can do that through market share gains, helped by our omnichannel platform, our analytics platform and by finance and insurance products. And of course, by aftersales, which as Duncan's illustrated is more resilient. The third pillar is M&A, where it's all about the consolidation I've spoken about, and there is ample opportunities to broaden our market footprint and expand with existing and with new OEM. When it comes to profitability, on the left-hand side, you see gross margin and the drivers of gross margin. Firstly, it's about the mix between vehicle sales and after sales. And we're pushing the after sales part ever higher through higher retention. Then it is about regional mix and it's about the evolution of M&A, and those businesses that we acquire, we try to make better. Now there is an impact of the supply/demand dynamic that we believe that's temporary. This chart here is absolutely important to take a look at. It shows the in-market's gross margin in our distribution and retail markets. And you can see that since 2010, the in-market distribution gross margin has been stable at around 17%. By contrast, our margin in retail has come down to around 10%. The other driver of profitability is overheads, where it's about much more than savings and cost inflation. We're leveraging our global scale here through the global business services and the digital delivery centers that Mark has been speaking about, and we aim to get more efficiencies from those. But also, we will be using our analytics platform to make our advertising and promo more effective. And then, of course, there are M&A synergies. Highlighted below is the COVID restructuring I talked about. We took out GBP 90 million of costs, of which we expect GBP 45 million to stay, supporting our margins on an ongoing basis. Now let's turn to vehicle lifecycle services, the 3 components that Duncan spoke about. Firstly, bravoauto. It's all about used car volumes and after-sale revenues. And of course, it depends of the speed we are able to roll out the platform. When it comes to digital parts, it's about the volume of parts sold and capturing marketing revenue. But I would add and emphasize on my part that we will absolutely maintain the group's low capital intensity also in vehicle lifecycle services. Now let's turn to cash generation. This is an extremely cash-generative business model. This chart shows the annual cash flow average over the past 5 years. So in terms of free cash flow, we have been generating north of GBP 200 million of free cash flow every year in the past 5 years. And that's been driven by a consistently high free cash flow conversion. After dividends, there's about GBP 150 million, which we then spent on acquisitions, and on share buybacks. The last point to make is our low capital intensity, less than 1% of sales is what we have been spending. And that logically takes me to the next slide that shows our high returns supported by balance sheet efficiency. If you stare at this chart on the left-hand side, which shows our return on capital employed over the last 10 years, you can just see how attractive distribution is and how it's been driving the overall group ROCE to over 20%. In terms of our asset base, we operate with net neutral working capital. And if you cast your eye on the right-hand side, you see how strong our financial position is. And whilst we have been helped or are being helped at the moment with the net proceeds from some of the disposals that we have been doing, we have very significant firepower for M&A to around over GBP 900 million. Now let's turn to our capital allocation policy. First thing to say is unchanged. Secondly, we believe it's very attractive, and we have a history of being disciplined in this regard. Starting on the left-hand side, we first invest in the business where the call on capital is low at below 1% of sales. In terms of dividends, we have a basic -- we have a payout ratio of 40% of basic EPS. And over the past 5 years, we've paid out GBP 420 million of dividends. And then there is value accretive M&A, where we are taking a disciplined approach. And we spent around GBP 600 million over the past 5 years on distribution acquisitions. Lastly, is the share buybacks. That is the way we return excess cash if we have it. And that's simply because of the flexibility that, that offers. And we've been returning just shy of GBP 300 million in the past 5 years through share buybacks. This framework is underpinned by a very strong balance sheet. We have agreed with the Board a net debt-to-EBITDA ratio of max 1x. So I would say a strong business model with exciting growth prospects. We're exposed to markets with significant growth potential. Innovation is where we clearly differentiate ourselves and where we believe that it will accelerate our global expansion. We have a strong financial position, which gives us significant firepower. And now we're leveraging our core capabilities to capture more value of a vehicle's life. Now let's turn to our medium financial outlook. Starting on the left-hand side with distribution excellence. We expect a mid- to high single-digit profit CAGR, assuming constant exchange rates for our organic business. And this is based on market growth of the Inchcape markets of circa 3% and an outperformance of circa 1%, and on higher operating margins than our historical average. On top comes M&A, where there is ample opportunities to buy distribution businesses around the world. But the quantum and timing of that is uncertain. What I can say to you is that our pipeline is attractive and also that we will continue with our disciplined approach. When it comes to vehicle lifecycle services within the next 5 years, we aim to double the volume of used cars and to have our digital platform operational and profitable, and in that way, contributing north of GBP 50 million of incremental profit over that time. So in conclusion, a compelling growth story with highly attractive returns, driven by profit growth, strong cash generation, dividends M&A and share buybacks. We believe we are well positioned to deliver significant value through organic growth, consolidation and cash returns. Thank you. And with that, we turn to Q&A. Duncan -- Duncan and the others, sorry.

So the same as before. Let's -- if you could put your hand up, we'll get a microphone to you. If you give your name, institution and question, that would be wonderful, and thank you for moving the furniture, team. I'll set that, good. Okay. And for those people online, if you type your questions in, then Raghav will read them out in the room.

It's Georgios Pilakoutas with Numis. First one, the multicar. Can you talk about -- so there's markets where you've got very high market share over the new car market, generally, where there's a Toyota contract there. And therefore, you're getting a lot of used car inventories as part of parts exchange. And therefore, you can see where you can kind of build a big platform. How does that work in markets where you've got much lower market share? And therefore, do you need to -- does that increase the value of adding new brand partnerships or driving market share on the new car side to then enable the growth of the used car side? And second one, you're now talking 75% of profit being from subsequent years. So that was previously 50%. So can you just clarify what has changed on that chart? And then 75% is a very big number that you're currently under-indexed in. So what's change that is enabling you to go after that opportunity? And then final one, the 3% market growth. I think that's below where you've historically spoken to TIV growth and kind of particularly given it feels like 2021 is a bit of a low year on given supply constraints. So why isn't that kind of a couple of percentage points higher really?

Okay. Very good. Thank you, Georgios. So let me -- I think I'm likely to lead on 1, 2 and 3, and then I will ask you before. And if gentlemen, if you'd like to give a nudge if I miss points, please do so. So let's talk about the first question. The first question then, so as we build out our distribution businesses, we will end up with way more than that 30,000 vehicles I spoke to before, coming through our networks in terms of trading. And then as we get motorization rates driving upwards in many of the markets we're in, I think I've spoken before, when you look at Ethiopia with a motorization of 9, think about a European Union average of about 540. That new car market builds out, the used car market builds a little bit more slowly and then overtake as what you can see on the chart when I spoke about parts is somewhere between 3x and that 5x bigger. So we think by putting these -- by deploying this technology into each of our markets, we can build a way bigger market share than we said at 1% before of these emerging markets come through. Now it's not going to happen next year or the year after, but it's fundamentally part of our business model. The second point I would say is that even in markets where we have a relatively low market share and in some markets, you might have a 1% market share. In others 5%, even in some of our markets, we're peaking at kind of like 12% or 13%. Where we have a lower market share, building the muscle for us to buy vehicles directly from consumers in that market gives us the ability to scale bravoauto in those countries. The next -- the final point I'd mention in terms -- in this regard is it is the relationships with those listing platforms, which is really crucial. It's clear what happens in mature markets. I gave the example of a maturing market like Romania versus a mature market like the U.K. But if you look at these maturing markets, it gives us the ability to look at what other assets could we deploy in that market to give us more access across the whole of the value chain.

Can you just clarify on the middle bit around buying directly from consumers. My understanding was that, that supply is coming entirely from parts exchange, i.e., I'm buying a car from Inchcape and I might sell in my old car.

So that is true. So we will get -- we may get a used car trade in when someone buys a used car from us. But we are deploying technology that enables you just if you want to sell your car without buying anything from Inchcape, we will buy your car. And it's where we're using analytics and data to enable that. That's what the Russian team have proven. Katie and the team in the U.K. have also proven that in the markets where we've been trialing that and proving that over 2020 and 2021. Now you -- the next question you asked about the -- previously, we'd said 50% of the profits are after the first phase of vehicle ownership, and I said 75%, well spotted. As we've been proving our model, we were originally thinking if you remember, Georgios, we spoke about what we've done in Greece. And we -- by the way, the Greece trial we won has gone well. We're rolling that to other markets in Europe and Jasmine and we sat the front has just opened a used car center with Toyota in Singapore, so that went well. But as we were looking at these different models, when we looked at bravoauto more closely, it gives us access to more of the profit pools that we wouldn't have seen if you look at the third-party dealers in a country and the third-party after sales. So we have said in February, it was 50%-50%. We think the profit pool is bigger because the technology we've built gives us access to the third-party market, not just through the Inchcape OEMs in the country. You asked a question about what's changed. I think what's changed fundamentally is our ability to build a global digital platform based upon our omnichannel technology, coupled with our use of data to buy and sell vehicles is what has changed. And we're always worried that it would shift our business model to be more capital heavy, which we did not want to do. The model we've built with very, very low-cost storage facilities for vehicles with that beautiful digital omnichannel sat above it is what is fundamentally what's changed in the way we think of vehicle lifecycle services from a used car perspective. Let me pause before handing over to Gijsbert for the 3%. George, is there anything you want to add to that?

Okay. Okay, sounds good. So Georgios, I think you're right to say that, let's say, historically, our growth perhaps has been a bit higher than 3%, not too much higher, but I think we're talking here about a medium-term outlook, and we're having to deal with 2022. So there is uncertainty around supply situation in 2022 that we have sort of factored into this a little bit, and that therefore, it may come across a bit -- a muted number. And it is, of course, geographically diverse as well. So the risk is to your mix that try to illustrate. But I think it is -- particularly 2022 is, I think, difficult to call, given the supply situation. So take it there's a nuance on what we've given.

Can I have one follow-up? You've spoken a lot about kind of how digital is unlocking all this additional growth. I guess the mid- to high single-digit growth outlook there, isn't that different to what Inchcape has perhaps achieved in the past. And given kind of the step change in the opportunity, how do you think about balancing going after more growth and capturing the greater opportunity versus kind of keeping the cash and prioritizing that?

Okay. I'll make some comments, then Gijsbert, if you would go just after that. Look, I hope you can see what we've been -- since we launched our -- what is now called Accelerate strategy in February. And the work we've done on it this year, I'm really excited about it. And not only am I excited about it, what has Inchcape team has done as we've lifted the covers a bit more today is we've proven we can make these business models work. Now we're not going to say we're going to blow the doors off in terms of our financial forecast because we're not that type of company. But the size of these markets we face into and the capability of the company leaves me really excited about what we have done and what we have ahead of us. Gijsbert?

Yes, look, Georgios, I think it is all about the combination at the end of the day, right? So I think we're striving for consistency of performance and you've expressed it in our medium-term outlook for distribution excellence, right? And then there's M&A on top. And then there is vehicle lifecycle services. I think if you add it all together, it would actually get you to a better performance than we've done historically, but I leave it to you as analysts to sort of add that up.

A question in the back, please.

Sanjay Vidya at Liberum. On used cars and the 14 million addressable market that you highlighted over half of that is the U.K., Russia and Australia, which historically have been quite tough markets for you from a retail perspective. Would you expect those 3 markets to represent more than half of the incremental used car volume growth you're targeting?

Very good question. So let's go back to what Gijsbert said before in terms of do we find those markets tough. What has been said before we're talking about our financial performance, actually, we've significantly improved the retail business in each of those countries. And that is not just what we've seen of this imbalance currently between supply and demand. I think we have the right teams in place who are using the technology in the right way to be able to perform. We have used both U.K. and Russia and some other markets in Europe to test and prove out these bravoauto propositions. And frankly, they've done a cracking job. Now the numbers themselves would tell you that we will end up with a bigger proportion of sales probably in those countries. But we are careful and considerate about what we're doing and the fact that we've proven the business model and the consumer feedback leads me with great confidence that we can expand in those markets. We need to do so in a really disciplined way. We lead with digital and omnichannel, and we build very, very low-cost storage facilities for those vehicles that our omnichannel sits over the top of. So we built a very, very low-cost, high-performance model. And then in our smaller markets, you can see, you're right, that chart kind of goes down that way to our smaller markets. that are emerging, but it's those markets that have a low motorization rate, and we get GDP growth coming through those. Those countries will grow like crazy for our distribution business and for our used car business. Okay. Can we come down to Mike, please?

Just a couple from me, if I may. Just with the new branded initiatives, et cetera, just to clarify, will that sit in retail or distribution when we look at the segmental purposes? And the second point was just on the ROCE target. So I mean if we piece together, I'm not done with the numbers yet, but in terms of incremental aftersales opportunity, cost savings, digital infrastructure, et cetera, 20%, given what you've been delivering any way might feel a little bit light on a medium-term perspective. So just any comments on that. I appreciate it's not judged on next year, it's more of a medium-term ROCE.

Those are both coming your way. Just let me give a bit of context first, also as to how we're running these businesses, Mike. So they will ultimately report up to the region's CEO. So if you look at what we are doing in Europe they will ultimately report into Glafkos, for example, but then we'll have teams who specialize in running these businesses. I don't want people getting confused in their day job between running a brilliant distribution business versus scaling our bravoauto, I think it's important as we scale those businesses, we take that view and have a segregation of duties in that regard in terms of who's responsible for growing which business. Gijsbert, over to you.

Yes. I mean in terms of disclosure, we need to do a bit of work, right? I mean, the most important thing, I think, is to show you progress that we're making in vehicle lifecycle services, and we'll provide appropriate KPIs as it were. As regards ROCE, I haven't spoken about a target. I've just shown to you how attractive distribution was with, to your point, a ROCE well above 20% and how does this driven the total of with retail being lower, right? It was a 10-year backward-looking average. So I think we both need to be mass to see where we end up on that one.

Andrew Nussey again from Peel Hunt. A couple of questions. First of all, in terms of the gross profit of GBP 1,200. Can you give us a feel of what you've assumed in that figure in terms of finance and insurance that can be sort of packaged into it? And also, just to be clear, in terms of the GBP 50 million medium-term target, is that just from the digital parts platform? And what can be delivered from bravoauto? Or have you made some allowance in terms of additional aftersales activity within there? And lastly, obviously, the used car platform, you've gone off to have a saying, can you share any sort of really high-level first thoughts about how that might or might not fit into the Inchcape model?

The third one, the listing platform. Okay. George, that's coming your way. Gijsbert, you're going to do the first one, and I'll do the second, please?

Look, I think that the GBP 1,200 per car wasn't an illustrative example, right, to sort of try and understand and dimensionalize a little bit so that you can get a feel of the gross profit that we're making today in used basically, right? 80,000 cars times GBP 1,200 is GBP 100 million in very simple terms. In many cases, we do a bundled sale, right? So there is a metal margin and there is an F&I margin, and we -- they're sometimes even sort of communicating vessels, if you like. But I think F&I, just to repeat what George has been saying, it has a one-off, let's say, in our case, commission income, right? So we don't take risk, we're the middle man. But more importantly, it provides the ongoing revenue streams as in accelerating the cycle, which is as much true in new car as it will be in used cars. So I'm not giving you, in short, a number out of the GBP 1,200. In terms of the vehicle lifecycle services number, let me just reiterate that we're aiming much higher than GBP 50 million, Mike. We wanted to give a medium-term target today. We wanted to ensure you it's not a bottomless pit, if you like. And that we want to generate profits from both bravoauto as well as from our digital parts platform, but see it as a total number. And over time, it will include the aggregator numbers as well, which we haven't -- gotten my head around. But we're comfortable with the GBP 50 million, let's say, in the medium term is where I would leave it.

That was 1 and 2. So George, 3?

Yes. Look, I think one of the great advantages we have is we operate predominantly in those smaller markets but we also have businesses in the larger markets. So you get to see how markets really mature. And when you look at the used car market and the role that an aggregator plays in those more mature markets, you see that if you could capture that element of the value chain, your ability to really understand the critical dynamics in that market around price, supply, choice, customer are amazing. So when you look at our other smaller, less well-developed market, we see those aggregator propositions as being less well developed and in some cases, absent. So we are looking at markets to see where we might be able to build out that capability because I mean, then we become a real end-to-end player. And if you own the aggregator, you really own all the market knowledge in that market. So no specifics yet. But strategically, it looks like an opportunity we need to take seriously and explore.

It's Sam Bland again from JPMorgan. I think I've got kind of 3, please. Slide 110, you've got the Americas and Africa operating margin sort of mid-single digit. I mean I'm sort of surprised it's not maybe a bit higher. Those are very small specialist niche markets. Asia is at high single digit. Are there any reasons why that should be mid-single rather than, let's say, high single? Second question is the mid- to high single-digit profit growth over the midterm. I guess that's organic, so doesn't include M&A, but does it include anything on new contract wins or is it sort of completely as the business is today? And can you just clarify and make sure that the GBP 50 million vehicle lifecycle opportunity is in addition to that mid to high profit growth not included within it?

Thanks, Sam. You proved very popular on this. So let's take them in reverse order. So the GBP 50 million VLS is in addition to the M&A and is in addition to the organic number, point number one. Does organic include new contract wins? No, it does not. That would fall in the bucket of M&A. We have a variety of M&A. We win contracts, we buy businesses, so that's, for us, is sort of 1 bucket of inorganic growth. And indeed it is. And clearly, the advantage of contract wins that you don't take, it will. You don't need to do some investments, but it's a great, very accretive route for us to take. So we definitely also focus on that. In terms of margins, I would say that the Asia margins are the ones that sort of stand out as being well, relatively high, very high, if you like, or the highest. And it's not so much about the A&A -- sorry, Africa and Americas margins, which actually very, very healthy. I mean the reasons that Asia is high is because it is, in many cases, really vertically integrated business. If you think about Hong Kong and Singapore and are almost but they are effectively city states, where we own, in this particular case, all the outlets, which may sound dramatic, but there's only a few, right? And in all the markets, we typically own like 25% of the dealer network and we manage the rest through orders. And you can understand that perhaps that leads to less competition than you would normally have. So it's more the standout of those markets, then that Americas or Africa are actually having lower margins.

It's James Zaremba again from Barclays. If I understood it correctly, I hadn't quite appreciated before that your VLS strategy would extend beyond your, I guess, OEM distribution partners. So I was wondering if you could just discuss a bit about, I guess, how ambitious what you're building out is in terms of the level of competition, what the barriers of interest are versus being a natural place for you to play where having those OEM relationships is a real hurdle for anyone else?

Sure. Okay. George, can I ask you to cover that, please? The first thing I would say, look, our OEM relationships are incredibly important to us. We are working actively with our OEMs in every market to make sure that we're maximizing all opportunities for them in the first life of a vehicle and subsequent lives of a vehicle. And you can see that with what we've done in Toyota in Greece and are rolling that across -- out across other European Toyota markets. And as I said before, Jasmine has just done that in Singapore. So without question, our OEM relationships are really important. But as we looked at that model, tested it and proven that model, we see an opportunity to get into other markets. And don't forget it's an enormous incredibly fragmented market. It's absolutely gigantic marketplace. So will there be a winner takes all in the used vehicle segment? I don't believe so. There will be a number of players that take share if they can digitalize and professionalize the market with, which is what we intend to do. We believe in these smaller markets as they grow motorization rate, and then the used car market comes behind that and takes over, gives us the opportunity for us to grow share to a more substantial point that we might be able to do in mature markets. George, anything to add?

Well, the question was about barriers to entry from competition into the...

Yes. If you're operating with brands where you're not the distributor, I guess, what advantage do you have for those brands with these platforms?

So for auto -- bravoauto, I've got to get that right, that's a brand we're creating. So -- look, I think broadly, the barriers to entry are theoretically lower than where you've got the distribution contract, and therefore, you own the brand and the name. But I think as we said through the presentation, we have a series of assets, relationships, experience, knowledge, infrastructure. That means that we can get there quicker and more effectively and thus, create the barriers to entry. And the U.K. is a bit of a specific example in terms of the level of competition in that used car market. When you look at our less developed markets, we're just not facing that intensity of competition. So I think, again, we've got the opportunity to get there quicker and to build higher barriers to entry, if you like. But Duncan is right, these are massive, very fragmented markets. So it's unlikely there's going to be an absolute winner takes all scenario. There will probably be several successful players going forward.

Okay. Let's look around the room. Raghav, do we have anything online?

Just 1 question on the phasing of the GBP 50 million of incremental profit in VLS. How to think about that?

Sorry, I'm just laughing because -- sorry, take the question very seriously, don't get me wrong here. But I mean it is -- I mean I reiterate, we're aiming for higher. We want to give you some guide where we could get to in 5 years. I think that's how you should take it. It's clear it will be back phased, right? As you start things up, that's how it will work. So don't expect 1/5 of that next year, right? That's the way to look at the phasing.

Okay. I think we're done for Q&A. Thank you very much, everybody. Thank you, team. Right. Okay. Now makes me wonder what we did wrong at the first Q&A. Well there's no drinks after. Right. Thank you very much, guys. So let's wrap up. Thank you so much for sticking with us, those of you online and in the room. So Inchcape is on an ambitious growth journey. We're the leading automotive distribution company. We've built a platform for our OEMs to plug into to drive performance in our markets. As I said before, I've got 3 decades of experience of doing this data and digital thing with some of the world's most advanced companies. And what we are doing is really special, and I thank the Inchcape team for that. We are uniquely positioned to capture more of the lifecycle value of a vehicle. And we've taken our responsibilities to our planet, people, the places we operate in and the practices that we deploy to look after our OEM brands really seriously. When you put these things together, we're in a great place to deliver really strong organic growth through consolidation and cash returns. So before I finish, let me say thank you very much to the whole Inchcape team for what you have done since I've been in the company for the last 18 months. I think we're in a cracking position. Thank you very much to everyone that's joined today. I'm really excited about this growth journey that our company is on. Now those of you in the room and you'd like to experience some fun with Inchcape people, we have some racing that's going to go in that room. You look like competitive people, and we have some canapes and drinks also. Thank you very much indeed.