Inchcape results not a hit with investors

The price of shares in FTSE 250 vehicle services provider and retailer Inchcape (LON:INCH) dropped by 5.04% to 565p (as of 15:00 GMT) after profits before tax and exceptional items for 2019 fell by 6.9%. Revenues for the year were up by 1.1%, but the company faced challenging markets conditions in Hong Kong and Chile while Australian profitability moved towards normal levels.

CEO Stefan Bomhard commented: “Our performance in 2019 against the backdrop of challenging dynamics in several markets demonstrates the resilience in Inchcape’s business model.

“Distribution continues to generate 91% of our trading profits and, setting aside the yen headwind, profit before tax, was flat year on year. Our businesses in Europe reported a strong performance and we saw underlying resilience in Australasia, and Asia growth despite the headwinds in Singapore and Hong Kong, offset by the impact of a contraction in the Chilean market. The supply constraints experienced in Australia and Ethiopia over the first half eased materially in the second half, improving our underlying performance. Our continuing Retail operations delivered a stable performance over the year.

“The Ignite strategy has continued to drive growth and we made transformative strategic progress last year. We strengthened our portfolio, acquiring Distribution contracts in Uruguay, Ecuador, Colombia, Kenya and Lithuania and disposing of certain retail-only operations in China, Australia and the UK. The acquisitions in Latin America demonstrate the success of Inchcape’s OEM Partner of Choice focus, establishing our first Daimler distribution operations after more than 30 years of retail-only partnership, as well as illustrate Inchcape’s regional consolidation strategy. In addition, we achieved both our F&I income and procurement saving targets in 2019 and continued to develop our omnichannel capabilities through our trial in Australia, with the trial ready to be exported to a couple of other markets for further development in 2020.

“Inchcape’s capital allocation process has remained disciplined, with excess cash returned to shareholders. We have today announced a new £150m buyback to be completed within the next 12 months.

“We expect challenging market dynamics to continue through 2020, particularly in Singapore, Hong Kong and Chile, although we are encouraged by the outlook for our European businesses. In addition, we continue to monitor how the Coronavirus situation develops. Against this backdrop, we will continue to focus on near-term opportunities whilst driving our medium-term aspirations“.