Inchcape looks set to continue its recent round of business disposals after agreeing to sell its Inchcape Fleet Solutions (IFS) UK vehicle fleet management and funding division to Toyota for £100m.
Since August the AM100 PLC has sold five Volkswagen car and van car retail franchises and three Audi dealerships to Group 1, Motorline and Harwoods Group (Crawley Audi) in the UK, along with six retail locations in Australia and the complete withdrawal from the Chinese car retail sector as part of a 16-site dealerships disposal operation expected to raise £150m.
In a statement issued via the London Stock Exchange today (October 10) the group announced its sale of IFS but asserted that "The UK retail dealership business remains strategically important".
It stated: “The IFS business leases fleet vehicles and provides fleet management services to B2B customers including Toyota.
“The scope of the business means there is limited synergy with Inchcape’s UK retail dealership business, where Inchcape acts as a franchisee of brands including BMW, Mini, JLR, Mercedes, VW, Audi, Porsche, Toyota and Lexus.
“The UK retail dealership business remains strategically important to the group, where Inchcape is a top five partner for key OEM partners, supporting the expansion of group distribution contracts since 2016.”
Just a week before the group disposed of eight UK retail sites in August, Inchcape Retail UK chief executive, James Brearley, denied suggestions that the group was planning to reduce its retail operations by 20%.
In an interview with AM he referred to suggestions it was about to close around a fifth of its then 113 dealership business as “speculation”, adding: “We carried out a review of our business towards the end of 2018, in light of general market trends and specifically WLTP, and it is clear that where we had a density of representation and we are able to bring certain services together we make in improved profit as a result,” Brearley told AM.
IFS has been a profitable operation for Inchcape in recent times.
In the year to December 2018, it contributed revenue of £60m and trading profit of £9m to the global business.
AM’s sister title, Fleet News, reported that IFS had ranked 13th in last year’s FN50 ranking of the UK’s largest fleet operators, with a total risk fleet of 20,415 cars and vans.
Toyota Financial Services was ranked 21st, meanwhile, with a risk fleet of 12,379 vehicles.
The gross assets of IFS, as included within the Inchcape Group consolidated balance sheet, as of June 30 were £78m.
The sale of IFS to Toyota is expected to be completed in Q4 2019 and as such the impact on Inchcape's 2019 trading profit is expected to be minimal.
The use of the proceeds will be consistent with Inchcape's existing capital allocation policies under the Ignite strategy whereby the focus is on growing both organically and inorganically, with any surplus cash returned to shareholders.
Commenting on today’s announcement regarding the planned sale of its IFS business in the UK, Inchcape’s group chief executive, Stefan Bomhard, said: "This transaction is a further demonstration of strategic progress and focus on our core distribution activities which generate 90% of group trading profit.
“We are pleased to have been able to further streamline our UK retail market activities by selling IFS at a good valuation.
“We remain focused on our Ignite strategy which frames our operational excellence initiatives, has driven 10 distribution deals since 2016, and sets the foundations for capabilities that will enable us to position Inchcape well for the future.
“I would like to thank our IFS team for all their hard work and dedication and wish them success under Toyota, Inchcape's oldest OEM partner."