The news comes as Inchcape announces the sale of its 40% stake in former Mazda/Kia UK importer MCL to the majority shareholder Itochu for a £6.6m loss.
AM revealed last October that Inchcape’s future with the Italian supercar maker was uncertain. Now it admits a new deal with Ferrari still needs to be agreed by the end of September if it is to continue to act as the official UK distributor.
“Negotiations are continuing,” says a spokeswoman for Inchcape. “Even if we did lose the contract it only equates to around £3m to £4m operating profits for us so it would not be material to the group.”
Inchcape has represented Ferrari in the UK since 1994, and is responsible for one in five of the models sold in Britain from its three Maranello Retail dealerships: St Albans, Herts; Sevenoaks, Kent; and Egham, Surrey.
The company’s interim results, published this month, show global pre-tax profits for the first six months of 2004 are up almost 31%, from £63.7m to £83.4m, on turnover up 13% to £2.2bn. This was led by strong sales in Singapore, Hong Kong, UK and Australia. Inchcape UK recorded six-month operating profits of £13.3m, representing a year-on-year increase of 38.5%.
Inchcape has a £164m pot of cash ready to drive growth, both in the UK and in its overseas businesses. Its preference is to expand with existing manufacturer partners, and to make large scale acquisitions.
“We’re reviewing all sorts of possibilities in terms of development. But we have very specific criteria– we want to take on whole market areas. We’re not interested in the small fry,” says the spokeswoman.
In June, Inchcape bought five Mercedes-Benz dealerships in the Midlands, giving it representation in East/West Midlands down to Oxford. The business also acquired a VW site in Cheltenham, Gloucs, and opened a Toyota outlet in Basingstoke, Hampshire. An interim dividend of 15p per share is payable, an increase of 25% on last year’s 12p.
Inchcape shares leapt 47p to £16.72 on the back of the results – in sharp contrast to the City’s reaction to Reg Vardy’s last month – although by this week (Tuesday), it had fallen back to £16.25.
Peter Johnson, group chief executive, says: “This year has started much better than expected. Our continued profit growth is testament to the effectiveness of our strategy in building partnerships.”