INCHCAPE has seen its profits grow by 14 per cent in its annual results for 2017, despite experiencing a downturn in UK new car sales.
The retail market presented a challenge globally, with new car sales slowing in a number of developed markets. The UK market decline in the latter half of 2017 put further pressure on margins, while it was impacted by the product cycle of some of Inchcape’s brands.
However, the automotive retail and service provider’s profit increase was credited to strong performance in its distribution sector and emerging markets, such as South America and Asia.
The distribution business contributes towards around 80 per cent of the group’s profit and, boosted by the performance in the new markets, means that trading profit performance moved ahead of plan, making distribution a strategic focus for future growth.
Aftersales were another highly successful factor, with an eight per cent constant currency increase globally, excluding the effects of the Subaru acquisition in South America.
Stefan Bomhard, CEO of Inchcape, commented: ‘Our global diversification and distribution-focused business model has been a clear advantage over the year. In 2017 we generated 79 per cent of profits through distribution and increased our exposure to the attractive emerging markets to 21 per cent, double the 2014 level.
‘This has enabled us to deliver a solid trading profit performance over the year despite margin pressures in retail markets. Within distribution, we saw organic high single-digit growth, with Asia a particularly strong performer, and total growth boosted by the South America acquisition which is trading above plan.’
He added: ‘Some highlights include group organic aftersales gross profit up eight per cent, profit growth in Russia driven by Ignite initiatives, and confidence in achieving the upper end of our targeted procurement savings plan. Our focus on becoming the OEM’s partner of choice is also yielding results, as demonstrated by new BMW contracts in Estonia and, more recently, Guam.’
‘We have sufficient resources to pursue both inorganic growth opportunities and return excess cash to shareholders. Therefore, the board has approved a new buyback up to £100m to be completed over the next 12 months and we are proposing a full year dividend of 26.8p per share, up 13 per cent year-on-year.
‘Looking forward over the medium-term, we are well positioned to continue to leverage our global scale, drive growth from the installed base of vehicles and benefit from our positions across a unique spread of markets. In 2018, we anticipate a more challenging year given continued supply and demand imbalance in our retail markets particularly over the first half of the year as well as new vehicle decline in Singapore, despite continued momentum across the rest of our businesses. Overall, we expect to deliver a resilient constant currency performance over 2018.’
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