Inchcape grows margin despite tough European markets

The car retailer and distributor, Inchcape, saw sales in 2011 hit by weak markets in the UK and Greece but managed to raise its operating margin through tight cost control.

Group sales decreased by 1.0% to £5.8bn for full year 2011 versus 2010. On a like-for-like constant currency basis, the decrease was 1.7%.

Profit before tax and exceptional items of £227.7m was 6.4% higher than 2010 and adjusted earnings per share rose by 10.9% to 35.5p.

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Inchcape's trading margin showed a 30 basis point (3/10 of a percentage point) improvement on 2010, to hit 4.5%, just 40 basis points below the group's 2006 record. The final dividend will be 7.4p versus the 6.6p handed out in 2010. Total dividend for the year came in at 11p.

Inchcape says capital expenditure grew during 2011, after two years of decline, with capacity increasing in Chile, Peru, Poland and Russia, where the company opened new sites in Moscow for BMW and Land Rover.

The difficult areas for Inchcape are not hard to spot: the Greek market declined by 32% in 2011, following a 40% decline in 2010, having been significantly affected by the deep recession and high unemployment. The Europe division's sales declined 7.5% compared to 2010, partly as a result of the Greek meltdown.

The UK was also a problem for Inchcape, with the ending of the car scrappage scheme leading to a 3.1% decline in sales to £2.06bn.

Andre Lacroix, Inchcape's Chief Executive said of the firm's outlook: "Notwithstanding challenging trading conditions in the UK and Europe, we expect to deliver a solid performance in 2012. ... We will benefit from our exposure to the fast growing economies of Asia Pacific and Emerging Markets which represent two-thirds of the group's earnings."

Shares in Inchcape opened up 0.78%.

BS