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Inchcape revenue rises as gross margin remains resilient

By Josh White

Date: Thursday 29 Jul 2021

Inchcape revenue rises as gross margin remains resilient

(Sharecast News) - Inchcape reported a 37% improvement in group revenue on an organic basis for its first half on Thursday, to £3.9bn, with growth coming in at 30% on a reported basis, with underlying revenue 3% below 2019 levels, pre-pandemic.
The FTSE 250 vehicle retailer said its pre-exceptional profit before tax totalled £143m for the six months ended 30 June, up from £9m year-on-year, which was supported by gross margin resilience and overhead savings.

Its statutory profit before tax totalled £61m, which it put down to the loss on the disposal of part of its retail operations in Russia.

First half free cash flow was £184m, further strengthening the company's financial position, with net cash totalling £435m at period end, compared to £266m at the end of December.

The board announced the launch of a £100m share buyback programme, and declared an interim dividend of 6.4p.

It also announced the expansion of its distribution footprint with three new contract awards, including a new original equipment manufacturer (OEM) relationship with Geely.

"The group delivered a strong set of results in the first half reflecting a good performance across all regions, higher margins and the ongoing benefit of our overhead reduction programme," said chief executive officer Duncan Tait.

"The group's inherently cash-generative business model saw a further strengthening of our overall financial position, and we are today launching a new £100m share buyback programme.

"At the height of the global pandemic our efforts were focused on protecting our people, collaborating with our partners and ensuring the resilience of the business, and we accordingly prioritised and successfully completed a major cost restructuring programme."

Tait said the company had since been able to turn its attention back to capturing growth opportunities across its markets, expanding its distribution footprint in two new markets in Asia and the Americas.

"We also signed a global strategic partnership with Geely, a new OEM relationship for the group.

"We are excited about the number of distribution opportunities across both existing and new markets, whether via acquisition or contract wins, and with both current and new OEM partners.

"We have made encouraging progress in realising our strategic priorities, with our central focus on 'distribution excellence'."

Of particular note was the "greater and accelerated" use of data and digital, Duncan Tait said, explaining that was evidenced by the roll-out of the firm's "omni-channel capability" and the launch of its 'digital delivery centres'

" In addition, we are making progress with the opportunities identified to capture more of a vehicle's lifetime value, where we believe there is significant untapped potential, and look forward to sharing more detail on our strategy and future growth prospects at our capital markets day in November.

"Looking ahead, whilst there continues to be a high level of uncertainty, both in terms of the pandemic and widely reported issues relating to supply, we expect that the strong first half performance - which in part reflected pent-up demand - will underpin our full year results and expect to deliver 2021 profit before tax of at least £260m.

"Our ambition is to become the undisputed distributor of choice for OEMs - we will achieve this by further strengthening our OEM relationships and with more emphasis on capturing the lifetime value of both customers and vehicles."

At 0904 BST, shares in Inchcape were up 2.02% at 860.5p.

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