28 July 2011

International auto retail group, Inchcape, announced pre-tax profits up 10.1% to £126.8m in the first half of the year but its turnover and cash generation was down.

Chief executive, Andre Lacroix, said the group delivered a “solid performance” in difficult trading conditions with revenue of £2.9bn in the first half of 2011, down 5.3% on the previous year. Mr Lacroix said the fall was due to the supply shortage following the earthquake in Japan and the continuation of an uneven global recovery.

The company is trying to console investors by highlighting that earnings per share (EPS) were 19.6p, up 14.0%, and declaring a high interim dividend of 3.6p when no dividend was paid at this stage last year. Analysts said the results were in line with expectations.

It appears to be the distribution side of the business that has taken the hit. In the first half of 2011, trading profit in distribution decreased by 5.0% in constant currency terms and was down by 3.8% at actual rates of exchange to £87.7m.

The retail division delivered trading profit of £51.1m, up 23.5% in constant currency and 25.9% at actual rates of exchange. The company said it performed better than expected in the UK while Russia and Emerging Markets also delivered strong trading profit growth.

In the UK the group said its retail business outperformed the market as like for like revenues increased by 1.3% in a market that was down and it delivered a very strong first half trading profit performance, 13.7% ahead of last year. Solid margin management on all value drivers resulted in a trading margin that has grown by 40bps to 3.0% in the first six months, a record for the first half.

In the used car segment, Inchcape enjoyed moderate growth in revenue with robust margins in the first quarter but saw a softer margin per unit in the second quarter.

As had been anticipated by several analysts, trading conditions in Singapore (sales down 26%) and Australasia (trading profit down 9.4%) have affected the group but sales in continental Europe (down 24.7%) were also weak.

Mr Lacroix said: “For the rest of the year, we anticipate the continuation of an uneven global recovery with inflationary pressure and government austerity measures affecting consumer confidence, particularly in the UK and Europe.

“We are taking action on costs to mitigate the impact on profits of lower new car sales and we expect used car demand to remain robust but margins will normalise following record levels in 2009 and 2010.”

Tags: Andre Lacroix, Inchcape, interim results, results