Inchcape’s British dealership showed a “relative resilience” in a “Lockdown 3” affected by COVID, as the sales business of SPS was able to offset sales losses from the retail sector, the SPS reported.
In a trade update for the period ended March 31, the AM100 auto trading group said sales were “above expectations” at £ 1.9 billion.
At a time when the group pulled out of franchise retail with an agreement to sell its Toyota and Audi dealerships in St. Petersburg, Russia for £ 70 million, retail sales were down 18% on a reported basis back, 14% year-on-year constant currency basis and 2% organic.
In contrast, sales revenue grew by 10% on a reported basis and 9% adjusted for currency effects (plus 4% organically).
The group said its UK retail operation had delivered “relative resilience in the UK amid severe restrictions” and a “solid start to the year in Russia”, where it keeps Rolls Royce and multi-brand used businesses in St. Petersburg and all operations in Moscow.
Duncan Tait, Inchcape CEO said, “Our first quarter results exceeded our expectations.
“The performance shows the underlying resilience of the group. Sales growth will be supported by a comprehensive recovery in our sales business.
“This also reflects our agility as we met the challenges of lockdowns and restrictions around the world by adapting and improving our operational capabilities.
“In line with our focus on markets with high growth potential, we have further expanded our sales base with JLR in Indonesia and Daimler in Guatemala.
“We have also agreed to sell some of our retail stores in Russia to further streamline our retail-only business.”
Tait said while the COVID-19 pandemic remains a source of uncertainty, the group expects “continued substantial earnings growth and improved operating margin for fiscal year 21”.
He added, “Our goal is to become the undisputed distributor of choice for OEMs.
“We will achieve this by further strengthening our OEM relationships and placing more emphasis on capturing the lifetime value of customers and vehicles.”
In its analysis of the first quarter trade balance, Zeus Capital said Inchcape would expect a pre-tax profit of £ 215 million in 2021.
Zeus added, “While Inchcape is currently trading at the high end of its historical valuation range by 2022 estimates, this does not reflect its debt-free balance sheet and the likely build-up of cash.
“Given Inchcape’s strong track record of capital allocation, we believe this will be used wisely in mergers and acquisitions, as well as dividend and share buyback activities.”
