Exposure to fast-growing emerging market economies helped Inchcape overcome continued weakness in the UK and Europe to deliver better than expected results. And having slashed costs by £124m over the last four years - including a further 6.7 per cent reduction in 2011 - the lean business is likely to generate significant profit growth in the years ahead as global car sales power ahead.
According to analysts at IHS Automotive, the global car market is expected to increase by 30 per cent in the next five years, largely driven by growing wealth in emerging markets. Strong cash flows meant that the group's cash pile continued to swell, giving Inchcape plenty of firepower to fund continued expansion in markets such as China, Latin America and Russia, the group's fastest-growing business with a 39 per cent sales increase in 2011. What's more, Inchcape will benefit disproportionately from the the replacement of an ageing car parc (total number of cars on the road) in Western economies with more fuel-economic vehicles. That's because 90 per cent of its business comes from premium manufacturers that are investing most heavily in efficient engines.
Broker Espirito Santo expects pre-tax profits of £247m and EPS of 38p this year (from £228m and 35.5p in 2011).
INCHCAPE (INCH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 407p | MARKET VALUE: | £1.88bn | |
| TOUCH: | 406-407p | 12-MONTH HIGH: | 437p | LOW: 261p |
| DIVIDEND YIELD: | 2.7% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 288p* | NET CASH: | £244m | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 6.06 | 240 | 6.4 | 2.7 |
| 2008 | 6.26 | 108 | 1.9 | 0.9 |
| 2009 | 5.58 | 137 | 22.9 | nil |
| 2010 | 5.89 | 192 | 27.9 | 6.6 |
| 2011 | 5.83 | 203 | 31.0 | 11.0 |
| % change | -1 | +6 | +11 | +67 |
Ex-div: 16 May Payment: 12 Jun *Includes intangible assets of £543m, or 118p a share | ||||
