Inchcape has confirmed that its London Stock Exchange listing has been reclassified to remove reference to retail as it disposed of 13 UK dealership locations as part of a renewed focus on distribution in 2020.
In annual financial results published this morning (February 25) the AM100 PLC reported that overall group revenues had fallen 25%, from £9.38 billion to £6.34bn, in a COVID-19 impacted year, as pre-tax profits slumped 131.8% to a statutory loss of £128m (2019: £402m profit).
But the business, which claimed government support totalling £30m as a credit against employee costs and £3m as a credit against other operating expenses, along with £7m in deferred tax, was able to improve its cash position and propose a dividend payment as it focussed on a distribution-focussed strategy offering “attractive growth prospects”.
The group was also listed as having benefited from the Bank of England’s Corporate Financing Facility, having borrowed £100m.
Inchcape followed a series of 2019 UK car dealership disposals with 13 more in 2020 and said in today's statement that its ‘Ignite’ strategy, determining its future growth, would now focus on “key growth pillars” of ‘Distribution Excellence’ and ‘Vehicle Lifecycle Services’.
In an interview with AM in July 2019 Inchcape Retail chief executive, James Brearley, denied suggestions that the group planned to close 20% of its 113 UK retail sites following a 2018 review of its operations.
But The London Stock Exchange has now formally acknowledged Inchcape PLC's strategic shift away from retail.
Inchcape's sector classification is now 'Business Support Services', having previously been 'Speciality Retail'.
In its UK and Europe Retail division, Inchcape saw its revenues in the period to December 31, 2020, decline 25% from £4.03bn to £3bn and operating profits declined 21% from £32.2m to £25.4m.
Its results statement stated that COVID- lockdown showroom closures from late-March had “weighed on the performance of both the UK and Russia businesses”.
The group added: “We experienced a step-up in the second half, with solid demand for New and Used Vehicles, as well as Aftersales services.
“During the first half, the UK business received £23m of government support (employment and business rates), but was nevertheless still heavily loss-making.
“We have not accessed any such support in the second half. Performance improved in the second half as we experienced higher Vehicle gross margins and the benefit from our cost-restructuring efforts.”
Among Inchcape's 2020 dealership disposals were: Citygate Automotive’s acquisition of Volkswagen dealerships in West London and Twickenham; Cooper BMW and Mini car dealerships in Tunbridge Wells to Arden; 12 BMW, Mini and BMW Motorrad franchised motor retail outlets to Vertu Motors; the £29.7m sale of its Jaguar Land Rover (JLR) Arch Concept dealership in Southampton to Hendy Group and the sale of its Oldham Volkswagen car franchise to Swansway Garages.
The group’s reduction in footprint came after 2019 disposals including those of seven sites to Group 1 Automotive and Motorline for a combined sum of £21m in August and the sale of its Inchcape Fleet Solutions (IFS) operation to Toyota.
Inchcape said today the transactions – 13 in the UK and two in Australia – had generated aggregate net disposal proceeds of £64m.
Despite its £128m statutory pre-tax loss in 2020, Inchcape reported that it had been able to further strengthen its financial position during the challenging period, with net cash of £266m (2019: £103m).
It also returned to the payment of dividends, with a 6.9p payment proposed for the year.
Like many businesses, Inchcape’s 2020 performance was a tale of two halves.
In July it announced a restructure aiming to cut costs by £90m annually after reporting a 36% decline in overall revenues and pre-tax losses of £188 million in the first half of 2020.
Four month later it said that it had experienced a ‘stronger than expected’ COVID-19 recovery from its operations in the UK and Europe, but still saw car retail revenues decline by 17% during Q3.