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Inchcape’s global reach offsets UK’s ‘slower growth’ in annual financial results

Stefan Bomhard

Inchcape has reported that the global reach of its automotive retail and distribution businesses helped to offset the UK market’s “slower growth” in 2017.

The AM100 group’s annual financial results for last year showed operating profit for the UK and Europe fall by 17% to £89.8 million as turnover from retail operations in the region fell by 7.5% to £4.74 billion.

Globally, group sales of £8.9 billion were up 9.4% year-on-year across its retail and distribution business, however, and a statement said that it “saw organic sales growth in all regions with a particularly strong performance in Emerging Markets, growing by 14.4% excluding the acquired Subaru and Hino business in South America” alongside a robust performance in Australasia.

The statement said: “Together these regions offset slower top-line growth in UK and Europe and Asia.”

The Group delivered an overall operating profit before exceptional items of £407.5m, 8.8% up year-on-year and up 0.8% excluding its new South American operations.

Trading profit within Inchcape’s distribution businesses was up 17.5% and, excluding the accretion of the new South American businesses, which grew by 7.3%, it reported.

Stefan Bomhard, Inchcape group chief executive, said: “I am very pleased with our performance over 2017, delivering strong profit and free cash flow growth.

“Our global diversification and distribution-focused business model have been a clear advantage over the year. In 2017 we generated 79% of profits through distribution and increased our exposure to the attractive Emerging Markets to 21%, double the 2014 level. 

“This has enabled us to deliver a solid trading profit performance over the year despite margin pressures in retail markets.

“Within distribution, we saw organic high single digit growth with Asia a particularly strong performer, and total growth boosted by the South America acquisition which is trading above plan.”

The group reported that it now had sufficient resources to pursue both inorganic growth opportunities and return excess cash to shareholders.

Its board has approved a new buyback up to £100 million to be completed over the next 12 months and is also proposing a full-year dividend of 26.8p per share, up 13% year-on-year.

Inchcape said that its car retail operations had taken steps to strengthen the business and capitalise on the recent years of new car growth.

As a result, the group recorded an 8% growth in aftersales gross profit.

Inchcape’s financial statements on its retail operations said that the group had delivered resilient revenue performance, growing by 3.8% despite a challenging UK market and underperformance of some European brands in the Australian markets.

All regional segments saw revenue growth, with strong performance in most of our European business and 15.4% revenue growth in Russia, it said.

Trading profit declined by 14.2% year-on-year, with margins down 40bps.

Bomhard said: “At the start of 2017, we set out our expectations for a challenging year and predicted declining sales volumes in the UK new car market.

“This proved to be the case, with an overall decline of 6% from the peak year of 2016. In this market context, margins have been under pressure and profit has consequently declined. As expected, our UK and Europe region saw profit this year reduced by
17% at constant currency, with a marked downturn in the second half of the year.”

However, Bomhard reported that the group’s focus on aftersales as a means of realising the inherent value in the UK's record Total Industry Volume (TIV) was reaping rewards.

Bomhard said: “Our world is changing rapidly and our 'Ignite' strategy has been designed to make sure that we stay one step ahead of those changes, and win from them.

“We expect to see the pace of change gather momentum and we are evolving our business to ensure that we maintain our market leading positions and unique relevance to our OEM brand partners and customers.

“In summary, we are well positioned to continue to leverage our global scale, drive growth from the expanding Car Parc and benefit from our positions across a unique spread of markets.

“Whilst we anticipate continuing challenges across some of our Retail operations, continued momentum across the rest of the Group gives us confidence that we will meet our expectations for 2018.”

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