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Inchcape sees pressure on UK trading profits and margins in first half of 2016

Stefan Bomhard

Inchcape experienced pressure on its trading profits and margins in its UK business for its half year results ended June 30, 2016.

The group's global pre-tax profits increased by 7.8%.

The group has businesses across the globe, but it’s UK operations saw its trading profit fall by 4.4% year-on-year over the half year period from £38.5 million to £36.8m. Its UK trading margins fell from 2.8% to 2.4%.

Overall sales grew by 12% and Inchcape's retail business grew by 10.3% as the business focused on premium and luxury brands.

Inchcape's retail business, focused on premium and luxury brands, grew faster than the market delivering like for like revenue growth of 10.3%

Stefan Bomhard, Inchcape group chief executive, said: “The competitive new vehicle market led to a decline in our new gross margin.

“Our retail trading margin decline of 30 bps in the first six months of 2016 was driven by three factors beyond the new vehicle gross margin decline: an increase in IT amortisation costs following the completion of the iPower rollout; higher sites costs following important refurbishments and new sites which are ramping up; as well as investments behind the operational improvements, including new dedicated used car teams in the majority of our sites.”

Bomhard said the UK business showed strong growth with its used vehicle operations and it has also seen growth with its aftersales hours sold and gross profit.

Inchcape is expecting the wake of the Brexit result to slow new car sales into the second half of this year. However, Bomhard said this would be offset by a “resilient second half performance for used vehicles and aftersales, albeit there is greater uncertainty on consumer demand following the EU referendum”.

Inchcape UK's results for the six months to June 30, 2016

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