Inchcape reveals profit dip for first half of year

10:26 am, July 25, 2019

INCHCAPE has suffered a dip in profit, it announced today in its interim results for the first half of 2019.

The global distributor and retailer of premium and luxury vehicles saw pre-tax profit slide by 3.3 per cent like-for-like from £158.9m to £153.7m in the six months to June 30, on revenue that went up from £4.614bn to £4.725bn – a rise of 2.4 per cent.

Operating profit, meanwhile, fell from £196.2m to £177.2m like-for-like – a drop of 9.7 per cent – while its pre-exceptional profit before tax of £156m was 13 per cent down year-on-year.

Earlier this week, it was revealed that Inchcape had sold five VW franchises in Essex and two Audi outlets in Kent to, respectively, Group 1 and Motorline. The interim report revealed that they had been loss-making in aggregate and were offloaded for £21m.

Commenting on the interim results, Stefan Bomhard, group chief executive of Inchcape, said: ‘Whilst trading in the first half of 2019 was challenging, as we had anticipated, we are today reiterating our resilient outlook for the full-year excluding a transactional yen headwind.

Stefan Bomhard

‘Distribution, which continues to contribute circa 90 per cent of our profits, saw strength in Asia and Europe offset by the impact of significant temporary Subaru supply constraints and a yen currency headwind in Australasia, as well as continued currency-related supply constraints in Ethiopia.

‘A sharp contraction in the Chilean market was a further pressure. Encouragingly, Australasia supply normalised towards the end of the period and we have secured currency for two large orders in Ethiopia to be delivered in the second half of the year, which supports our resilient group full-year outlook.’

He added: ‘Progress in retail has been encouraging with continued growth in Russia, driven by Ignite, and a broadly stable performance in the UK and Australia. The UK retail business benefited from improved stock management and Australia retail from cost control measures taken, despite the continued pressures in both markets.

‘We have now launched the next phase of our plans to improve the span of performance across our UK business, and as a part of this we announce the sale of seven retail sites, which in aggregate were loss-making in 2018, for £21m cash proceeds. In addition, in Australia we have now agreed the sale of a third retail site, in addition to the two site disposals announced in May. We have been able to realise cash proceeds of £13m in total in Australia through disposing of these unprofitable sites.

‘I am pleased with the strategic progress that we are making. The retail market portfolio optimisation in the UK and Australia is a tangible demonstration of our focus on capital deployment and productivity. We integrated new BMW distribution businesses in Lithuania and Kenya, consolidating our position with this OEM partner in the Baltics and pioneering our presence with them in Africa.

‘Our Ignite strategy continues to yield results and in the first half of 2019 we saw further delivery of procurement savings, aftersales gross profit outperformance, and finance & insurance profit growth.

‘We remain focused on capital discipline and shareholder returns with the £100m buyback announced in May well under way and to be completed by the end of December.’