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Inchcape profits drop to £108m

Inchcape, Britain’s most diversified dealer group, now operates in 26 countries. But only one, China, is still growing according to chief executive André Lacroix.

In announcing his 2008 financial results last week Lacroix said: “The downturn affecting our industry has spread throughout the world in the last six months.”

Lacroix has made a dash for cash while the equity market is in a mood to accommodate bargain share issues. The 6p rights issue was a massive 88% discount to the prevailing price in the market at the close the previous night. The take-up was good enough for shares to settle at 65p.

The cash-raiser yielded £232 million. It will not be extensively used to pay down debt as £150 million of stock reductions already planned will reduce debt even after capital spending on acquisition installments of £60 million and a pension fund top-up.

The UK market in March at the half-way point was “very similar to the 28% year-to-date decline”.

The fall in pre-tax profit in the year was from £240 million to £108m on revenues that were up 3%, but adjusted for currency were down 4%, like for like.

The first half was actually very strong with a record margin of 4.4%. 

Profit was hit further by exceptional charges for £82.5 million on closures, redundancies and the right-down of values on recent acquisitions. 

In 2008, vehicle sales from Inchcape’s UK retail operation on a like-for-like basis were down 5.4% against an 11.3% market decline overall.

Before the rights issue, Inchcape had gearing 1.9 times earnings so analysts gave the swift and decisive action a warm welcome. 

The rights issue is believed to have been fully taken up from the underwriters and the share price has strengthened.

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