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Star turn for group

Inchcape, under the new direction of the ex-Euro Disney boss Andre Lacroix, last week announced earnings for the first half of the year that were up 22% on last year.

Britain’s second largest retail group, which is a vehicle dealer and distributor all over the world, came in with operating profit before exceptionals of £110m. A sixth of that was earned in the UK.

By the end of the year, profit will exceed £200m – more than three times that of five years ago.

The share price over the last six months has also run up by 20% but fell on the day of announcement – caused partly by the simultaneous interest rate rise in the UK.

The results marked a new level of confidence for the group, which was able to lift the interim dividend by a whopping 56%. The cash position after that payment will be nearly £80m – an amount similar to that which was taken out of working capital by “tight control” over the period.

Chairman Peter Johnson has made it clear that he sees a role for Inchcape in further consolidating dealerships in the UK. During the Pendragon acquisition of CD Bramall and Reg Vardy, and then the failed hostile bid for Lookers, Inchcape stood back.

But its last acquisition was one of its largest. Lind was bought just after the end of the period for £110m and is described as “a significant step in our strategic development”. Lind gave Inchcape a much-needed presence in the south east, created a partnership with Honda, renewed one with Audi and pepped up the ties with BMW, VW and Land Rover.

Inchcape Retail UK did well in the face of new car sales for its brands falling 4.7% in the period. It managed a sales increase of 3.4% to a total of £663m. The trading profit on that was up 37% to give a trading margin at the upper end of the UK retail sector of 2.8% – next year that should hit 3%.

Progress was explained as being part process improvement and part customer initiatives. The star performances were from VW, Mercedes, BMW and Lexus. Rental and fleet business both grew substantially.

Inchcape also benefited from a 7.5% rise in used car sales, improvement in aftersales retention, particularly for cars aged above four years, and F&I penetration above 40%.

“That’s the model for this year: pressure on new car margins offset by growth in used cars, aftersales and F&I,” says Inchcape Retail managing director Spencer Lock.

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