UK: Inchcape cautious on 2010 as some recovery seen

By just-auto.com editorial team | 17 December 2009

Trading performance remains strong despite challenging market conditions and the Inchcape group was expected to close 2009 slightly ahead of expectations, the global auto distribution group said in a statement on Thursday.

It said total revenue for the 11 months to November 2009 was 11.4% below last year in actual currency and 17.5% below last year in constant currency and like for like revenue was down against last year by 9.4% in actual currency and 15.6% in constant currency.

But added that, in the second half of 2009, group revenues were benefiting from a strong demand in new cars in the UK and the early signs of industry recovery in Hong Kong and Australia.

"Our gross margin performance remains robust and we continue to benefit from good used car margins in several markets. Our after sales business, which represents half of group gross profit, is performing well," Inchcape said.

"Our cash flow generation remains strong and our cost base and working capital are well below levels at the end of last year."

It said the UK retail business was enjoying a stronger than expected fourth quarter with new car sales significantly ahead of last year due to the scrappage incentive scheme and from the VAT increase in 2010 pulling forward demand in the premium sector; "margins on used cars currently continue to remain at the exceptionally high level we saw in the first nine months of 2009".

In Europe, the underlying demand for new vehicles remained weak, however.

"Markets in eastern Europe and Russia continue to be challenging but our competitive position is improving.

"The market recovery in the last two months in Hong Kong has been ahead of our expectations and our margin performance in Singapore is healthy despite an extremely weak market.

"In the last two months we have seen the early signs of an industry recovery in Australia where we continue to grow market share."

Inchcape maintained previous guidance of being broadly debt free at the end of 2009.

On next year it said: "Although the group financial performance is expected to be slightly ahead of previous expectations as a result of a strong fourth quarter, we continue to remain cautious for 2010.

"As stated previously, we do not expect any global car industry recovery to start until well into the second half of 2010 as consumer confidence is still weak and unemployment continues to rise in many of our markets. However, we are confident that the group has the financial strength and flexibility to trade effectively and to continue to gain market share."