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Inchcape results show strong first half performance

Inchcape, the international automotive distributor and retailer, has announced its half year results for the period ended June 30, 2010.

The results show the group delivered solid revenue growth with sales of £3.1bn in the first half year, an increase of 11.1%.

The group generated an operating profit before exceptional items in the first half year of £123.7m, an increase of 41.5% from the first half of 2009.

It saw a return on sales before exceptional items up 90bps to 4.0%.

Profit before tax and exceptional items of £115.2m was up 76.1% on the year.

The group's retail operations delivered trading profit of £40.6m, up 43.1% in constant currency and 52.6% at actual rates of exchange.

On a like for like, constant currency basis, sales were up 11.6%.

Specifically in relation to Inchcape's UK operations, which include its UK retail business and fleet leasing business, Inchcape Fleet Solutions, the company said the new vehicle market has continued the growth which began last year with the introduction of the scrappage scheme.

The market grew by 20% for the first six months and excluding scrappage orders grew by 14.5%. The market remains well below its 2007 peak however, with the first half 21% below those levels.

Inchcape’s share of the premium retail market grew in the first half of 2010 compared to last year.

Its retail business has delivered a "very strong" first half performance with like for like revenue 12.4% ahead of last year, predominantly driven by new and used vehicle sales., it said.

Operating margins have improved across the board compared to 2009 thanks to solid cost management and top line growth which have driven trading margins up 0.8ppt to 2.6%, its best result for the first half.

Inchcape Fleet Solutions delivered a very strong first half with revenue 41.4% ahead of last year. With improved supplier pricing and flat operating costs, trading profit increased by 58.8% compared to 2009.

Despite a likely pull forward of sales from early 2011 into the end of 2010, ahead of the VAT increase in January, Inchcape predicts a smaller overall market in the second half than the first.

Additionally, the market will compare to very solid growth in the second half of 2009, triggered by the scrappage scheme.

Inchcape's focus for the second half will be to continue to outperform the industry and deliver higher margins and returns through capitalising on strong new product launches, the further development of aftersales with Inchcape Advantage programmes focused on appointment desk, follow-up calls, Electronic Vehicle Health Check and loyalty offerings.

The company has said it will continue to concentrate of its five priorities:

  • growing market share
  • growing aftersales
  • reducing costs
  • managing working capital
  • selective capital expenditure investment

Despite the positive first half performance, Inchcape is preparing for a tougher second half.

It said it expects the "continuation of an uneven global recovery" and so remain "cautious" for the second half of 2010.

Austerity measures implemented by a number of European governments including the UK may affect consumer confidence and slow down the global recovery that is being driven by strong growth in Asia Pacific and the emerging markets, it said.

Nonetheless, Inchcape still expects another strong performance in the second half of 2010.

“We have delivered a robust recovery with profit before tax up 76% in the first half of the year, which is a testament to the strength of Inchcape’s broad geographic portfolio and diversified revenue streams," said André Lacroix, CEO of Inchcape.

"We benefited from the positive impact of operational leverage with strong vehicle revenues driven by industry growth and market share gains in many of our markets and good momentum in our aftersales business which represents half of the group’s gross profit.

“Inchcape’s competitive position continues to improve through our strategic commitment to superior customer service enabled by our operational focus on our top five priorities of growing market share, growing aftersales, reducing costs, managing working capital and selective capital expenditure investment."

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