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Dealership sell-offs leave Inchcape happy with Q3 trading

Stefan Bomhard

Inchcape says it is on track to meet full year profit expectations following “significant strategic progress” to sell off dealerships.

The multi-national motor distributor and dealer has “streamlined our business around our distribution core, by releasing significant value from retail-only businesses”.

It has sold off a number of operations. But it also announced it has bought the Daimler group licenced distributor in Uruguay and Equador.

Based in London, Inchcape now has only dealerships in the UK, having announced the £100 million sale of its UK leasing division, Inchcape Fleet Solutions, to Toyota last month.

Inchcape’s last distribution contract in the UK was for Ferrari and Maserati, but that ended in 2004 when the luxury car manufacturer set up its own national sales company.

In July it said it was seeking "cost optimisation" and sold seven Volkswagen and Audi dealerships in the UK, and it has since sold dealerships in China and Australia.

Inchcape’s Q3 2019 trading update to the stock market yesterday noted group revenue at £2.4 billion was 3% ahead on constant currency.

Its distribution channel drove much of the increase, with its retail division growing slightly.

It said its UK and Europe retail businesses delivered a profit “in-line with expectations for a broadly stable 2019, but UK new car market remains challenging”.

Stefan Bomhard, Inchcape’s chief executive, said: “I am pleased with the significant strategic progress we have made over the last three months.

“We have streamlined our business around our distribution core, by releasing significant value from retail-only businesses.

“We are tracking in line with full year profit expectations despite some unanticipated headwinds in our markets, demonstrating the resilience of our distribution business model.” 

He said distribution comprised 90% of Inchcape’s profit in the first half.

“Distribution is Inchcape's core focus and a review of our portfolio has driven the disposal of retail-only assets in China, Australia, and the UK, which were sub-scale and non-core businesses and could not be leveraged to drive our distribution business.

“I am pleased that we will generate cash proceeds of circa £250m from these disposals.”

He said the acquisition of the Daimler distributor in Uruguay and Ecuador represents Inchcape’s first distribution contract with Daimler during 30 years of selling Mercedes-Benz in the UK.

He concluded: “Performance year-to-date has been in-line with our expectations, with H2 underlying profit performance expected to be stronger than H1.

“We reiterate our expectation for a resilient constant currency profit performance for 2019, excluding the AUD/JPY headwind.

“Given the expected timing of disposal and acquisition completions we expect minimal profit impact in 2019.”

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