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Gloomy profit growth forecast by Inchcape

AM100 retail group Inchcape said weakening demand in the UK would wipe out profit growth this year after announcing its interims.

Analysts agreed, cutting their global profit expectations for the group by 5% on 2007.

They now forecast pre-tax profits for the year at £233 million (2007: £237m).

Global profit before tax and one-off items rose 8.6% to £130.3 million in the six months to June 30, and sales were up 5.1% to £3.3 billion.

But while the global results have been relatively robust, UK operating profits dropped 14% to £32.7 million (2007: 28.6m), on turnover down 7.4% to £1,334 million.

Trading profits, which exclude acquisitions, disposals and closures, also fell, by 5.8% to £32.4 million, despite a 1.2% rise in like-for-like sales to £1,258 million.

Shares dropped 6p to 252.75p following the interim statement.

Inchcape is heavily committed to emerging markets like China, Russia and the Baltics, which it expects to return £1 billion in revenue next year.

However, like its plc rivals Lookers and Pendragon, Inchcape has warned that demand in the UK, which accounts for 21% of group profit, has slowed sharply since May and is likely to remain subdued.

Inchcape communications director Ken Lee told AM that the group would be sticking with Tata-owned Jaguar and Land Rover franchises, after announcing in March 2007 that it wanted to part ways with both brands.

Lee said: “We met with Tata several times to talk about its plans and we agreed with Tata’s premium positioning plans for Jaguar and Land Rover.

“It’s been a recent decision and it was also based on the good performance that Land Rover and Jaguar has delivered for us this year.”

Inchcape has disposed of its Ferrari, Maserati, Kia, Bentley, Volkswagen and Vauxhall businesses over the past 18 months and is still looking to dispose of 12 more sites.

The disposals fit with the group’s plans to build scale with premium brands.

“We were concentrating on far too many franchises in the UK,” Lee said.

“There’s no set target for when we want to dispose of the remaining sites, it will just be when we find the right price with the right buyers.

“We remain realistic about the car market over the next 18 months.

“We’ll be growing organically through aftersales and we’ll also be focusing on capture rates and F&I sales.”

Inchcape will be using web leads and mystery shopping to help boost its aftersales revenues.

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