Global automotive retailer Inchcape this morning reported that its UK business performed better than expected in the third quarter.
The business, which includes dealer group Inchcape Retail and its leasing company Inchcape Fleet Solutions, benefited from market share gains from luxury brands where underlying demand was up 14%, excluding the impact of last year's scrappage.
Used car sales were "solid" in Q3, with good revenue growth and robust margins, said the company, while aftersales remains strong.
However Inchcape announced that it wants to take £25m of costs out of the business, which will include 500 job losses plus the disposal of 10 sites.
No details were released of where the cuts would take place, but they will be carried out "in short order" an insider said.
Those measures are related to the "challenging outlook in 2011" for four of its key markets - the UK, Greece, Belgium and Singapore.
UK new car market to drop
The company estimates a UK new car market of 1.9 million units in 2011.
Globally, Inchcape's total revenues for the nine months to October have risen 7.6%, while like-for-like revenues are up 8.6%.
Group chief executive André Lacroix said: "The group has performed better than expected in the third quarter and Inchcape will deliver a robust earnings recovery in 2010, slightly ahead of expectations.”
It is being boosted by the strong industry recovery in Hong Kong, Australia and South America and improving market conditions in Russia, he said, while the slowdown in new car registrations in the UK following expiration of the scrappage incentive was as expected.
Free of debt
The group continues to benefit from a solid gross margin performance, tight cost control, strong cash conversion and, as the business has been debt-free since the end of 2009, lower financing costs.
Lacroix added: "In the first nine months of 2010, the Group has enjoyed the benefits of operational leverage with strong vehicle revenues driven by industry growth and market share gains in most of our markets and good momentum in aftersales, which represents around half of group gross profit.
"Inchcape’s strong performance is driven by our group-wide operational discipline on our top five priorities of growing market share and aftersales while improving margins, controlling working capital and being selective about our capital expenditure.
Cautious on short term outlook
"We expect the continuation of an uneven global recovery and remain cautious regarding the short term industry outlook in some of our markets.
"Given our strong track record and the cost restructuring initiatives announced today, we expect the group to trade effectively and improve its competitive position in these challenging trading conditions."