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Inchcape puts focus on used cars and fixed costs review

Inchcape’s UK business is putting increased operational focus on used cars to drive revenue growth now the new car market has peaked.

The international motor retailer and distributor has also revealed it is reviewing its fixed cost base across the group, as it anticipates its trading to be impacted by slower revenue growth, currency pressures and uncertainty about the market in North Asia.

In a trading update, the international motor retailer and distributor said like-for-like revenues in the UK in Q3 were 7.3% ahead year-on-year.

It also stated it achieved good growth in aftersales, in line with its strategic focus, but was experiencing a slowing new car market trend and lower gross margin for new vehicles.

Overall, including its overseas businesses, Inchcape reported group Q3 revenue of £2.01bn, up 15.3% at actual currency and 4.8% at constant currency.

Inchcape’s trading for the three months to September 30 2016:

·     Group revenue £2.01bn, increasing by 15.3% at actual currency and 4.8% at constant currency

·     Like for like (LFL) revenue was up by 14.6% at actual currency and 4.3% at constant currency

·     Distribution revenue was up by 19.5% at actual currency and 1.8% at constant currency

·     Retail revenue was up by 12.5% at actual currency and 7.0% at constant currency

Stefan Bomhard, Inchcape chief executive, said: "Our solid third quarter revenue performance is consistent with our expectation for growth across the majority of our regions and for moderation from the growth rate seen in the first half of 2016. Pleasingly, the group saw growth across all five of our revenue streams in the third quarter.

“Notwithstanding the adverse exchange rate between the Japanese yen and the Australian dollar and the difficult trading environment in our North Asia region, we continue to expect to deliver a resilient constant currency performance in 2016.

“Inchcape benefits from a high quality distribution and retail footprint and partnerships with the world's leading premium OEMs. Our global scale enables us to leverage organic and inorganic opportunities, our operational expertise within a competitive industry and our local knowledge to deliver a differentiated customer experience.

“I am excited about the long-term growth potential of Inchcape as we deliver on our five 'Ignite' strategic objectives: leading in customer experience, delivering the full potential from all of our revenue streams, becoming the OEMs' partner of choice, leveraging our global scale and investing to accelerate growth. 2016 has seen the creation of these objectives and the start of our actions to realise our full potential. I am pleased with our progress so far and look forward to delivering against each in the coming years."

He said with over three quarters of profits denominated in currencies other than sterling, Inchcape’s reported actual currency performance is benefiting from sterling's weakness.

“An anticipated slower top-line environment, the transactional currency pressure in Australia and uncertainty on the timing of a market recovery in North Asia impact the trading outlook for 2017. As such and as we increasingly look to leverage our global scale under the Ignite strategy, the group is reviewing its fixed cost base to ensure we are appropriately positioned for the future.”

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