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Inchcape targets ‘cost optimisation’ after Volkswagen and Audi disposals

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Inchcape has said that it is targeting “revenue and cost optimisation” in the UK car retail market after its disposal of seven Volkswagen and Audi dealerships this week.

Commenting within its first-half 2019 financial results published today (July 25), the AM100 group said that it had seen its retail business in the UK stabilise during 2019 and was seeking further improvements following the recent disposal of seven sites to Group 1 Automotive and Motorline for a combined sum of £21 million.

Group 1 acquired five Volkswagen car and van franchises - in Chelmsford, Colchester, Romford and Southend - while Motorline has trebled its Audi representation in Kent with the acquisition of dealerships in Maidstone and Tunbridge Wells followed its purchase of the Canterbury East Kent Audi business from Inchcape in June last year.

Inchcape chief executive, Stefan Bomhard, said: “We have now launched the next phase of our plans to improve the span of performance across our UK business, and as a part of this we announce the sale of seven retail sites, which in aggregate were loss-making in 2018, for £21m cash proceeds.

“I am pleased with the strategic progress that we are making. The retail market portfolio optimisation in the UK (and Australia) is a tangible demonstration of our focus on capital deployment and productivity.”

Globally, Inchcape reported group revenue growth of 2.4% year-on-year to £4.7 billion in the reported period to June 30, 2019.

Profit before tax and exceptional items of £156.3m was down 11.8% year-on-year, meanwhile.

Inchcape's share prices declined 5.2%, from 617.5p to 585p per share, upon news of the results this morning but have already begun to show signs of recovery.

The group's performance in the UK during H1 was once again grouped together with those of Europe and showed a 1.3% decline in revenues to £1.61 billion and an 18.8% decline in trading profit to £11.7 million.

In its H1 results statement, the group said that the profit decrease represented “reasonable performance” against the declines experienced over 2018 and amidst continuing UK market pressures.

It said: “The UK market was down 3% in the first six months with diesel decreasing by a further 19% leading to a continued oversupply of New Car product in the market.

“Whilst the market remains unfavourable, we are encouraged to see that our improved opening inventory position and focus on driving all value drivers has helped to stabilise performance.

“We expect the next phase of our UK productivity plans, which include a further focus on costs and the disposal of seven less profitable sites in H2, to continue to stabilise the performance of the UK business.”

Inchcape’s global distribution business delivered a 2.5% increase in revenues during the reported period, to £2.49 billion, but its overall trading profit declined by 10.9% to £171.6 million.

Commenting on the global group-wide results as a whole, Bomhard said: “Whilst trading in the first half of 2019 was challenging, as we had anticipated, we are today reiterating our resilient outlook for the full-year excluding a transactional yen headwind. Distribution, which continues to contribute c.90% of our profits.

“We remain focused on capital discipline and shareholder returns with the £100m buyback announced in May well underway and to be completed by the end of December.”

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