The Parts Alliance Overview

Transcription

1 The Parts Alliance Overview 2017 Investor Day November 28, 2017

2 Preliminary Comments Forward-looking statements: The information provided in this presentation contains some forward-looking information, which includes certain risks and uncertainties, and may cause the final results to be significantly different from those listed or implied within this presentation. For additional information with respect to risks and uncertainties, refer to the Annual Report filed by Uni-Select with the Canadian securities commissions. The forward-looking information contained herein is made as of the date of this presentation, and Uni-Select does not undertake to publicly update such forward-looking information to reflect new information, subsequent or otherwise, unless required by applicable securities laws. p2

3 The Parts Alliance (TPA) is the #2 UK distributor of automotive parts for the independent aftermarket 1999 first established as a trading group 2 distribution centers 14 acquisitions since ,400 independent customers served $346M annual revenues 171 corporate stores operated #1 Technology leader with proprietary catalog system 122,000+ SKUs, covering 98% of UK and Ireland car parts ~2,800 team members p3

4 A world-class leadership team blending blue-chip experience with deep industry knowledge Executive Team Peter Sephton Chief Executive Officer 16+ years as President of EMEA, Brady Corporation (listed on NYSE) 4 years as CEO at The Parts Alliance Andrew Field Chief Information Officer 30+ years Automotive industry experience Co-founder of DDS (provider of innovative technology systems to the The Parts Alliance) Neil Croxson Chief Financial Officer 12 years as CFO, UK and Northern Europe at Rexel (distributor of electrical and datacomm components) 2 years as CFO at The Parts Alliance Jonny Clarke-West Group Managing Director Appointed to that position on October 1st 12 years progressing through various roles at GSF (acquired by The Parts Alliance in 2015) Joanne Warren Human Resource Director 15+ years at The Parts Alliance Held various roles in the business A strong team delivering balanced growth organic & acquisitive p4

5 Strength and depth of our senior leadership team Senior Operating Management Team 5 members of the Executive Team + Director, H&S and PARC Sales Director Nat. Accts M&A Director Commercial Director Product Director Operations Director Procurement Director Property Portfolio Director Store Optim. Director p5

6 We demonstrate our industry leadership in 4 different ways 1 2 Large store network 171 owned stores giving wide geographic coverage 27 member-owned stores Wide parts offering 1.2M parts records in AlliCat 122K SKUs held nationally Average of 15K SKUs held within 5 miles of customers Comprehensive tiering of branded and own brand 3 Innovative proprietary technology 4 Successful acquisition track record Boosting performance post-acquisition p6

7 We demonstrate our industry leadership in 4 different ways 1 Large store network 171 owned stores giving wide geographic coverage 27 member-owned stores p7

8 We demonstrate our industry leadership in 4 different ways 1 2 Large store network 171 owned stores giving wide geographic coverage 27 member-owned stores Wide parts offering 1.2M parts records in AlliCat 122K SKUs held nationally Average of 15K SKUs held within 5 miles of customers Comprehensive tiering of branded and own brand Engine Oil Braking - Hydraulics Catalysts Good Own brand Own brand Better Aftermarket Best Premium Spark Ignition Engine Timing Wheel Bearings Own brand Springs p8

9 We demonstrate our industry leadership in 4 different ways 1 2 Large store network 171 owned stores giving wide geographic coverage 27 member-owned stores Wide parts offering 1.2M parts records in AlliCat 122K SKUs held nationally Average of 15K SKUs held within 5 miles of customers Comprehensive tiering of branded and own brand 3 Innovative proprietary technology p9

10 We demonstrate our industry leadership in 4 different ways 1 2 Large store network 171 owned stores giving wide geographic coverage 27 member-owned stores Wide parts offering 1.2M parts records in AlliCat 122K SKUs held nationally Average of 15K SKUs held within 5 miles of customers Comprehensive tiering of branded and own brand 3 Innovative proprietary technology 4 Successful acquisition track record Boosting performance post-acquisition p10

11 Agenda UK industry landscape The Parts Alliance Our track record Keys to our success Technological advantage Future earnings growth Conclusion p11

12 The UK aftermarket for automotive spare parts has grown at an historical CAGR of 3.5% and is now estimated to be worth 4bn at the distributor level UK aftermarket replacement parts: market size at the distributor level 1 bn Note: Distributor market size calculated from retail market size (Castrol report) by assuming 30% (Frost and Sullivan 2 ) gross margin applied by distributors before selling to retail market Note (1): Excludes franchise dealers, VAT and expenditure on MOT testing, but does include parts required to pass the MOT Note (2): Gross margin assumption (Frost & Sullivan) based on data provided by manufacturers in the US and Canada and discussion with major players in the market. Covers OE and non OE parts. Source: Castrol Professional Car Servicing & Repair Trend Tracker 2016, Frost and Sullivan Global Dashboard of Selective Automotive Aftermarket Parts, PwC Analysis p12

13 4 main market drivers providing steady growth 1 2 Automotive technology Car parc size and age 3 Increasing complexity of vehicles driving demand for professional repairs vs DIY More durable cars built since the early 2000s have increased the potential life of vehicles Growing popularity of turbocharger technology on combustion engines and hybrid cars creates new demand 74% penetration of turbo in Europe Consumer behaviour High consumer acceptance of high-quality non-oem parts 4 3.0M more cars older than 5 years in 2016 vs 2008 Car parc getting older, with average age of 7.7 years in 2016 vs 6.7 years in 2006 Regulatory requirements Annual Mandatory Ministry of Transport (MOT) test for all vehicles of 3 years or more MOT inspection certificate required to renew annual road tax and car insurance Exhaustive MOT test coverage p13

14 MOT test includes a comprehensive inspection to ensure that the vehicle is in roadworthy conditions Lights Steering & suspension Fuel system Emissions Wheels and tires Brakes Bodywork Doors Seats & seatbelts Windscreen Horn Mirrors p14

15 Demand for aftermarket parts has been highly resilient during economic downturns UK aftermarket replacement parts: market size at the distributor level 1 bn Last recession Market driven by size and age of car parc, NOT by new car registrations Decrease in new car registrations in a downturn leads to increases in car parc and repairs performed Reduced consumer income increases the price attractiveness of non-oem branded parts and repairs performed outside of OEM dealerships Note (1): Excludes franchise dealers, VAT and expenditure on MOT testing, but does include parts required to pass the MOT Note (2): Gross margin assumption (Frost & Sullivan) based on data provided by manufacturers in the US and Canada and discussion with major players in the market. Covers OE and non OE parts. Source: Castrol Professional Car Servicing & Repair Trend Tracker 2016, Frost and Sullivan Global Dashboard of Selective Automotive Aftermarket Parts, PwC Analysis p15

16 The portion of the UK car parc aged 3 to 10 years will continue to grow from 2017 to 2020 UK car parc by age Number of cars, million 15+ yrs yrs Forecast Age of car CAGR CAGR yrs 8.9% 3.0% yrs 5.3% -0.1% TPA s key segments 6-10 yrs yrs -2.1% 2.7% 3-5 yrs yrs -1.2% 4.8% 0-2 yrs yrs 2.0% 0.3% Note: Forecast based on the assumption that number of new registrations and percentage of scrappages remains constant at 2016 rates Source: DVLA, SMMT, PwC Analysis p16

17 The Parts Alliance is a strong #2 player in the UK Major player in the UK Rank Company Estimated market share by revenue (1) # of corporate stores UK market coverage (4) Serving national accounts (2) #1 25% 216 (3) #2 7% 171 (5) #3 4% 109 Just bought by GPC #4 4% 26 Member of The Parts Alliance Trading Group #5 2% 91 Source: Company data, management estimates. Notes: (1) Based on latest available fiscal year. (2) Excluding collision repair parts revenue and Andrew Page. (3) Excluding paint distribution branches. (4) Total direct distribution network. (5) Excluding warehouse sales to distributors and member stores. Top 5 players control only 43% of the market, leaving ample room for consolidation p17

18 UK industry landscape - Recap Highly resilient industry with favorable underlying demand drivers The Parts Alliance positioned as a strong #2 player, serving national accounts and independent garages Ample room for industry consolidation, with only 43% of the market controlled by the top 5 players p18

19 Agenda UK industry landscape The Parts Alliance - Our track record Keys to our success Technological advantage Future earnings growth Conclusion p19

20 Two phases in the history of The Parts Alliance Group : Trading group only Today: Distributor + Trading group Membership The Parts Alliance trading group formed to serve national accounts, develop an own brand strategy for founding members Acquisition HgCapital acquires CES UK, Allparts, SC Motor Factors and GMF Motor Factors HgCapital acquires The Parts Alliance and consolidates previous acquired members as the Parts Alliance Group Ltd GSF Car Parts (UK wide) acquired by Parts Alliance Group SAS Autoparts and Waterloo Motor Trade (Yorkshire) acquired by Parts Alliance Group Parts Alliance acquire BMS (May 2017) CES UK, GMF Motor Factors (both Wales and midlands), SC Motor Factors (London and South East), and Mill Autoquip (South West) join the Parts Alliance BBC Superfactors (North West) becomes a Parts Alliance member CPA (South East) and BMS motor factors (North West) become Parts Alliance members CPA and Bromsgrove MF (Midlands) acquired by Parts Alliance Group Parts Alliance acquire dissolving Unipart (South West) branches and open first Parts Alliance branded branches Step acquisition 1 of DDS (technology company) Parts Alliance acquire BBC (sept. 2017) Source: Management information Note (1): Step acquisition as TPA acquired initial stake in DDS in 2009 The Parts Alliance has successfully acquired and integrated 14 companies since 2012 p20

21 Past acquisitions have been carefully targeted to provide national coverage p21

22 Proven track-record of accelerating post-acquisition growth Acquisitions by current Management Team Growth track record Target Date acquired Branches Acquired Revenue ( m) Revenue growth CAGR Pre-acquisition Post-acquisition Feb m 4% 15% Sep m Sep m 3 years (1%) 3 years 0% 1 year 6% 2 years 10% 10% Consistent above-market organic growth achieved postacquisitions 3 years 3 years Jun m 4% 7% 3 years 3 years Regarded by UK targets as a winning platform in the consolidating UK market p22

23 The Parts Alliance Recap First founded as a trading group in 1999 to service National Accounts Rapid growth through acquisitions as a distributor since 2012 Proven track-record of accelerating post-acquisition growth Regarded by UK targets as a winning platform in the consolidating UK market Providing broad UK coverage, including Scotland and Ireland p23

24 Agenda UK industry landscape The Parts Alliance Our track record Keys to our success Technological advantage Future earnings growth Conclusion p24

25 6 keys to our success 1 Service-led culture 2 Leading parts catalogue and order fulfilment software 3 Data-driven approach to Sales & Marketing 4 High quality performance management systems 5 Systematised entrepreneurial acquisition platform 6 Tailored solutions for key customer segments p25

26 1 A strong service-led culture Focused on providing local service, national strength Never say no attitude instilled from a branch-level upwards Leadership that grew up in the parts business and has helped shape the evolution of the industry Sales advisers trained both as sales experts and as technical parts professionals Committed, collaborative people with an average branch manager tenure of 9.8 years The Parts Alliance enjoys a considerably higher NPS than its competitors Net promoter score: Overall, how likely are you to recommend (motor factor) to a colleague or friend? NPS = 23% NPS = -16% Source: TPA s October 2017 customer survey with sample size of 300 respondents Competitors p26

27 2 Leading parts catalogue and order fulfilment system AlliCat parts catalogue functionality Ordering & fulfilment functionality 1 Integrated vehicle identification recognition 35m registered vehicles 5 Streamlined ordering Easy to use interface to simplify the purchase process Easy access to extensive database 1.2m parts references, 4m applications, 11.2m cross-references Real-time information Live pricing, availability and delivery information Rich content High resolution images, reliability information and streamlined access to technical data Recommendation engine Insightful advice based on proprietary expertise and historical data Comprehensive product range Good, better, best product offerings End-to-end parts traceability Historical audit trail for complete monitoring Proven benefits of AlliCat <90 seconds / call 12% returns rate (1) 1.2m part references / 11.2m vehicle cross-references Identify the right part quickly Best-in-class handling time driving significant improvements in sales advisor productivity Industry-leading returns rate One of the most comprehensive and accurate parts catalogue in EMEA Note:(1) Applies to National Accounts. p27

28 Current spend buckets 3 Data-driven approach to Sales and Marketing GEO-MARKETING ANALYSIS to identify regional / local growth opportunities Market potential + Competitive intensity CUSTOMER SEGMENTATION to better tailor our service and offering 6 customer segments from A to F Geo-Marketing Example: London Region Market Potential High > 4k A Market Potential TPA (non-gsf) revenue GSF revenue + Low k > 500 Low C E (bought recently) F (not bought recently) Customer potential B D > 4k High Additional Analytics market white spots census, insurance and ramp data Each customer then assigned an individual lead potential score through further analysis of spend behaviours p28

29 3 Data-driven approach to Sales and Marketing These analyses and tools are leveraged though locally-driven sales and marketing initiatives Acquisition & Share of wallet growth Loyalty & Retention Customer acquisition program Loyalty program Targeted promotions Targeted back-end rebates, linked to monthly target, paid in TradeClub points Garage / workshop program p29

30 Hourly Daily Weekly Monthly Yearly 4 High quality performance management systems based on a powerful technology infrastructure Powerful scalable technology infrastructure Powerful sales management systems Proprietary purchasing & inventory management systems 2m+ investment made to deploy a unified communications infrastructure across the network Ample capacity to support significant expansion of the branch network Transactional / KPI data generated to drive business insights Analyses to improve sales call effectiveness and productivity Live sales report enables regional managers to monitor branch-level sales on a minute-by-minute basis Increased productivity by +250 hours per day across the group Stock analysis and recalibration system optimises stock levels while maintaining/ improving parts availability 24/7 monitoring of stock levels by branch Timing of report production and management monitoring Call flow Sales Availability planning Highly structured performance management system Incoming call & dropped call volumes Answered call conversion rate & average order value Live sales per sales advisor Level of discount & overrides used by sales advisor STARS Pricing MAPS p30

31 5 Systematised entrepreneurial acquisition platform Culture, systems, processes and tools aligned to facilitate acquisitions/integrations and existing store growth GSF Acquisition Case Study Sustaining an entrepreneurial culture Retain talent, expertise and entrepreneurial passion Maintain local relationships and customer service levels Systems Institutional-quality systems, processes and tools Unified communications infrastructure (One System) High capacity data / phone lines Cloud-hosted datacentre Maintain branch / brand identity Value & emphasize industry heritage Encourage healthy competition with other branches/ brands Continue to instil a culture of ownership Maintain accountability for performance, running the business like they own the business Cultivate innovation at the local level Identify and develop the next generation of leaders within the industry Processes Tools Best-practice in sales, inventory management, category management and logistics processes Leverage competency teams within the group Access stock from other brands to improve offer and availability Access incremental national accounts business Improve customer conversion / retention with digital tools Drive focus with performance monitoring tools and targets Promote accountability at the branch level The acquirer of choice, and a growth accelerator for new branches and add-on acquisitions p31

32 6 Tailored solutions for key customer segments Independent Garages Needs Product availability Close Proximity to customer Accurate part identification Multiple price points Sales advisor on hand Solutions High fill rates (Ranging/STARS) Owned branch network Best-in-class parts catalog (AlliCat) Tiered offer (Good-Better-Best) High availability through world-class telephony system National Accounts National Network Single working entity High quality product offering Sales and compliance drivers Accurate 1 st pick, low returns Owned store network + select independents Consolidated invoicing and tracking Tiered offer (Good-Better-Best) Full traceability Best-in-class parts catalog (AlliCat) p32

33 Keys to our success - Recap Service-led culture Tailored solutions for key customer segments Leading parts catalogue and order fulfilment software Data-driven approach to Sales & Marketing High quality performance management systems Systematised entrepreneurial acquisition platform p33

34 Agenda UK industry landscape The Parts Alliance Our track record Keys to our success Technological advantage Future earnings growth Conclusion p34

35 The Parts Alliance has built a comprehensive technological platform providing clear competitive advantage Technology Description External users AlliCat Catalogue software system that matches parts to vehicle license plate Draws on multiple databases and uses algorithm to accurately match parts Filters list of parts to only provide relevant ones across three price points: good, better, best Distributors (TPA network) Client-side technology AlliCat Online Version of AlliCat for direct use by garages Simplified user interface GS OneStop Garage management tool that includes, workforce management, monitoring of repairs, scheduling, invoices etc. Autossessive and GSF online May be single or multi-garage use 2,500 garages ~ 450 garages E-commerce Garages, DIY Large bandwidth AlliCat and telephone system can operate simultaneously during peak hours delivering high performance Infrastructure and data Unified comms system Integration of phone system onto single network Increases visibility of call flow Calls can be redirected through network to available sales personnel Distributors (TPA group) STARS system Uses predictive model to maximise availability whilst holding minimum required stock Aims to reduce working capital requirements Distributors (TPA group) Source: PwC, Discussion with management, Management information p35

36 Our proprietary AlliCat software is the market-leading catalogue software system 4 advantages of AlliCat vs 2 main competitive systems Ease of use Simpler and intuitive design Tailored interfaces for the end user, e.g. online system for garages, retail offering and customised platforms for national accounts Advantages confirmed by a recent PwC survey 2017 survey of 11 catalogue system users Significant room for improvement AlliCat Competitors Entirely meets needs Accuracy More advanced cross referencing process New supplier catalogues can be flexibly added as businesses are acquired Product managers refine the parts catalogue as they: (1) Work with part suppliers to improve cross referencing (2) Complete feedback loop for users to report errors and improve accuracy Speed Both search and transaction processes can be performed in AlliCat Reduced need to check parts in supplier catalogue as a result of greater accuracy Quality of information More detailed car information available in AlliCat, e.g. emissions status Clearly shows if parts are in stock, availability of alterative parts, and detailed pictures Unique database established over time enables AlliCat to be more informative and more accurate than other systems in the market AlliCat Competitors AlliCat Competitors AlliCat Competitors p36

37 Leading telecoms solutions used to handle 92% of orders New system redirects calls automatically if needed Previous system Customer calls branch and if sales advisors are busy is kept on hold, resulting in abandoned calls New system Customer calls branch and if sales advisors are busy, call is redirected to a regional sales advisor Sales advisor can see customer details and stock for customer s local branch Benefits 1. Fewer abandoned calls 2. Decreased average answer time 3. Better reporting standards allowing benchmarking and Abandoned call rate identification of %, May 2016 Feb 2017 underperformers Average wait time Seconds, May 2016 Feb Average # of calls received per day : c. 14,000 The system is scalable and can cope with 700 branches May June July Aug Sep Oct Nov Dec Jan Feb Implementation of networked phone system May June July Aug Sep Oct Nov Dec Jan Feb 4. Ability to respond to local factors, e.g. staff absenteeism, power outages, etc. p37

38 Our technology platform provides seamless integration, to generate more sales and offer better service Customer purchase journey Inbound call Take call Screen based on VRM 1 and required part Filtering of results Sale of spare parts Typical competitor system Phone system Autopart Catalogue system Alternative part look-up 2 Catalogue system ERP system Phone system AlliCat Source: PwC, Management interviews, depot managers interviews, Note: (1) Vehicle registration mark; (2) e.g. using Partslink or TecDoc This is a critical element of our value proposition p38

39 GS OneStop is an ERP-like software developed specifically to secure business from independent garages Key features Customer / vehicle management Jobs cards, diary and scheduler Quotations and invoices Service schedules & repair times Sales & purchase controls SMS & reminders Vehicle registration & post code look-ups Customized user profiles Seamless integration with AlliCat Online We have been using GS OneStop for over 12 months now and we are very satisfied with it. We have found GS OneStop has improved our image to our customers and made producing our year end accounts a lot less hassle. Dawlish 2n4 Repair Centre GS OneStop is a clear differentiator which we will further leverage to secure more business from independent garages p39

40 TPA s systems are rich with data, providing opportunities to optimize pricing and product range 122,000 SKUs ~ 19M Line transactions per year Big Data Opportunities Customer segmentation Pricing algorithm Predictive system 23,400 Independent customers Sales optimisation and more Significant opportunities to further leverage big data p40

41 Technological advantage Recap Comprehensive technological platform providing clear competitive advantage AlliCat is the market-leading catalogue software system Sophisticated telecom system integrates seamlessly with AlliCat to provide faster & better service GS OneStop and big data provide further opportunities p41

42 Agenda UK industry landscape The Parts Alliance Our track record Keys to our success Technological advantage Future earnings growth Conclusion p42

43 4 pillars of future earnings growth Store Performance Optimisation New Store Openings Acquisitions Technology p43

44 Earnings growth pillar #1 Store Performance Optimisation Store Performance Optimisation New Store Openings Acquisitions Technology Productivity and efficiency initiatives (e.g. standard operating processes and procedures) Organic sales growth using geomarketing and customer segmentation New executive position created to benchmark stores and performance Improving margins Improving inventory turns p44

45 Earnings growth pillar #2 New Store Openings Store Performance Optimisation New Store Openings Acquisitions Technology We open new stores in white spot areas where the opportunity to acquire existing businesses or adopt new members is limited 4 new stores were opened in new greenfield locations scheduled for opening in early 2018 p45

46 Earnings growth pillar #3 Acquisitions Store Performance Optimisation New Store Openings Acquisitions Technology Short-term focus on further consolidating the UK market Top 5 players control only 43% of the market Many independent motor factors meet our acquisition criteria Profitable Well-respected local brands Store network complementing ours Opportunistic approach for the moment outside the UK p46

47 Earnings growth pillar #4 Technology Store Performance Optimisation New Store Openings Acquisitions Technology Continue to develop and promote our proprietary platforms as competitive differentiators AlliCat AlliCat Online GS OneStop Capitalise on big data opportunities p47

48 Agenda UK industry landscape The Parts Alliance Our track record Keys to our success Technological advantage Future earnings growth Conclusion p48

49 In summary Strong #2 player in the UK market Tailored solutions for national accounts and independent garages Room for further industry consolidation Top 5 players control only 43% of the market TPA regarded as a winning consolidation platform Further earnings growth potential Acquisitions + New store openings Leveraging technology + Store performance optimisation p49

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