9:15 am, July 28, 2022
Inchcape has posted a 52 per cent increase in pre-tax profit of £184m for the first six months of 2022.
In a half-year report released today, the global automotive distributor, said the figure – up from £121m in the corresponding period of 2021 – had been driven by topline growth and improved operating margins.
Meanwhile, group revenue for the six months to June 30 was up 12 per cent to £3.9bn.
Also today, Inchcape, which has dealerships across the UK, announced that it was proposing to buy Derco – the largest independent automotive distributor in Latin America – for a cash and share consideration that valued it at £1.3bn.
Highlights included broadening its OEM footprint as well by adding Porsche, Volvo and JLR in Chile, and exiting from Russia by disposing of its remaining retail-only business there to local management – the latter prompted by the invasion of Ukraine.
Group CEO Duncan Tait said: ‘Inchcape has had a great first half. Continued strong consumer demand and fantastic execution from our teams has driven growth in revenue, profit and cash.
‘We’ve also made excellent progress with the two strategic growth priorities of our Accelerate strategy.
‘Firstly, we have continued to extend our global leadership in automotive distribution, adding new OEMs through acquisitions and contract-wins, and invested further in digital and data analytics – a key differentiator that is driving growth.
‘Secondly, we are making progress on capturing more of a vehicle’s lifetime value with the rollout of bravoauto, and will be launching the platform in several markets in the second half.
‘Today’s announcement of the acquisition of Derco, the largest independent automotive distributor in Latin America, is an important milestone in the execution of this strategy.
‘It provides a step-change in the scale of our distribution business and increases our exposure to the highly attractive, fast growth region of Latin America.
‘With a clear strategy, driven by our ambition to be both better and bigger, Inchcape is well positioned to capitalise on further opportunities for organic growth and market consolidation, and I am confident we will continue to deliver sustainable long term value for all our stakeholders.’
Inchcape said its 2022 outlook was unchanged from its update of last month.
‘Based on the performance to date and our expectation for the second half, with an improved outlook for vehicle supply and robust demand, we expect to deliver FY22 adjusted PBT from continuing operations between £350m and £370m at prevailing exchange rates.
‘The strength of our business model and financial position means Inchcape is well placed to continue to grow profits and generate cash, and we are confident in the medium-term outlook set out at the Capital Markets Day in November.’
Reacting to the news, financial services group Zeus Capital said in a statement that the ‘strong set of results’ were eight per cent of its forecast and that the Derco transaction looked to be ‘good value’.
It added: ‘Overall, we believe Inchcape continues to be well positioned as it makes strong progress on multiple fronts.’
Meanwhile, Julie Palmer, partner at business consultancy Begbies Traynor, said: ‘Car dealers have their foot on the gas as supply chain problems mean there aren’t enough computer chips to make new vehicles, squeezing availability and pushing up prices in the used car market.
‘The issue has revved up car dealers but Inchcape, which unlike many of its rivals has global operations and acts as a distributor as well as running showrooms in its overseas operations, has been a huge beneficiary of the trend thanks to its worldwide exposure.’
She added: ‘We know that global economic uncertainty means people are becoming more hesitant about splashing out on big-ticket purchases such as a brand-new motor but there’s plenty of opportunity for Inchcape.
‘Manufacturers are looking to cut costs and outsource work such as distribution and sales, and Inchcape’s close relationships with the car giants mean it’s ideally placed to take work they don’t want, driving the business to places rivals can’t reach.’
