ASE & Motor Trader Financial Conference 2013 Mike Allen Executive Director – Panmure Gordon & Co

Overview Introduction UK economic environment Reasons to be optimistic about UK Motor Retail Reasons to remain cautious about UK Motor Retail A look across the pond in the US Stock market environment Concluding thoughts Q&A

UK Economic Environment Overview UK economy recovery is underway but will be a long and slow process Most economic projections suggest UK GDP growth will exceed 2% by 2015 at the earliest... Austerity measures gathering pace, but likely to ease ahead of next election in 2015 Unemployment structurally high, wage inflation modest and below inflation Fuel costs impacting buying behaviour Consumer confidence remains fragile, buying incentives remain key

UK Consumer confidence indices

Labour market dynamics

Inflation and consumer saving rates

Reasons to be optimistic on UK Motor Retail New car data continues to improve and remains below historic peak levels Euro Zone markets remain under pressure Pent up demand building through ageing UK car parc Used car market remains stable Consolidation dynamics remain attractive Valuations remain below peak levels

New car registrations remain strong

Clear pressure in the European New Car Sales

Key FX trends

Government debt suggests on going weak Euro

Clear evidence of pent up demand in UK market UK car parc/average age Source BCA

Supportive supply/demand dynamics in used cars

Valuation undemanding, above average growth..

Reasons to be cautious about UK Motor Retail UK consumer still faces significant pressures on household income –Fuel price inflation –Structurally high levels of unemployment –On-going squeeze on family income –Fragile confidence –Significant incentives to purchase still needed Historical trends important – remember the 2% rule OEM behaviour likely to remain erratic given Eurozone pressures – close eye needs to be kept on dealer targets Used car values appear to have fallen in March – seasonal adjustment as opposed to real market income Cyclical industry on wafer thin margins = rocky road at all times

The 2% rule in action since 1988

More pain to come in the housing market?

A look across the pond

Stock market environment

Concluding Thoughts UK economic recovery will be long and slow PLC dealer groups expected to make progress in 2013 vs. a decent year that was 2012 – H should be good Dynamic sector with improving performance standards – online presence, stock control, cost base optimisation and consolidation Stock market valuations undemanding at this stage of the cycle Beware of fickle stock markets as well as consumers and on-going macro economic concerns Rocky road always the case in this sector but through the worst Q&A