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Jobs at risk as Inchcape issues profits warning

Inchcape has told staff of its intention to restructure the business, resulting in job losses, after it issued a profit warning to the City.

The dealer group warned that its results for 2008 will be “below consensus” and 2009 will also be “significantly below previous expectations”.

In a statement to the stock market, the dealer group said: “Trading conditions have deteriorated significantly in the UK and are weakening in a number of our other markets.”

Ken Lee, Inchcape group communications director, told AM: “The first nine months of the year produced a pleasing set of results for us. However, since quarter three there has been a drop off in consumer confidence.

“We’re looking at the size of the organisation and we’re about to step into consultation on a site-by-site basis across the country, including our group head office.”

The cost of restructuring the business over the next eight months will be £55m, of which £27m will be the cash cost. Inchcape hopes it will result in annual savings of £50m and is focusing on reducing overheads, particularly in the back office.

Lee confirmed that jobs are likely to be lost but he could not says how many.

“We have contacted dealers about streamlining the business and that’s a process we’ll be stepping into over the coming days,” he said.

“We’re looking closely at the back office but we don’t want the restructuring process to affect our customer service focus.”

Trading for the nine months to September 30, 2008, showed like-for-like group sales were down 1% although Inchcape’s operating margin was in line with last year at 4.8%.

The group’s underlying pre-tax profit for the nine months was up 2.2% in sterling terms and down 7% in constant currency compared to the same period last year.

Inchcape’s share price fell from 126p to 78p in reaction to the news. It has since dropped to just under 62p.

Analysts’ average estimate is for pre-tax profit of £193m for 2008 and £171m for 2009. Inchcape made a £235m pre-tax profit last year.

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