Inchcape has continued its plan to move away from car retail with the £70 million sale of its Toyota and Audi dealerships in St. Petersburg, Russia.
The PLC confirmed in February that its London Stock Exchange listing had been reclassified to remove reference to retail after it disposed of 13 UK dealership locations as part of a renewed focus on distribution in 2020.
Now the group has revealed plans to further the strategy in its overseas markets with the disposal of its St. Petersburg Toyota and Audi franchised operations to “local market operator” KlyuchAvto.
In a statement issued to AM today (April 22), a spokesperson for the group said: “Inchcape’s global strategy has been to retain, but right-size retail operations as has been done in the UK over the past 18 months, and Russia is now taking a similar approach.
"We will retain our Rolls Royce and multi-brand used businesses in St. Petersburg, as well as all operations in Moscow. And we remain committed to our retail operations in the UK.”
Giving notice of its disposals in Russia today, the PLC said: “The transaction is conditional upon final OEM partner and regulatory approvals and is expected to complete in the second-quarter.
“In 2020, the disposed operations generated revenue of c£200m and profit before tax (pre-exceptionals) of £12m. Gross assets at the end of 2020 were £77m.
“Owing to accumulated foreign exchange translation losses (£110m), the disposal will crystallise an exceptional loss before tax of £65m.
“The proceeds from the disposal will be deployed consistent with the Group’s strategy to grow the core Distribution business.”
In annual financial results published in February 25 Inchcape reported that its overall group revenues had fallen 25%, from £9.38bn to £6.84bn, in a COVID-19 impacted 2020, 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, said that it had been 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. A spokesperson for Inchcape told AM that this was repaid in full within three months, and all government support given after July 1 also repaid in full.
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’.
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 in February’s results statement that the transactions – 13 in the UK and two in Australia – had generated aggregate net disposal proceeds of £64m.
Today’s statement about the disposal of businesses in Russia stated that Inchcape will provide an update on its first-quarter trading on April 29.