The buzzword in Inchcape’s first-half results was operational gearing. By keeping gross margins steady and tightly controlling operating costs, the car distributor clocked 76 per cent underlying profit growth as consumers returned to the showrooms in most of its markets, which range from Macau to Moscow to London.
Chief executive André Lacroix notes the recovery has been "uneven" and expects that to continue. The only major region to show a decline was South Asia, which he attributes to a blip in the Singaporean replacement cycle. Profits from emerging markets - including China, now the world’s largest car market - more than doubled but remain a small share of the pie, partly due to ongoing weakness in Eastern Europe and Russia.
Inchcape is mostly unaffected by the end of scrappage schemes, as it doesn't operate in the US or any major European market apart from the UK. But Mr Lacroix admits the 59 per cent profit bounce in the UK was a one-off.
Following 9 per cent upgrades, house broker Investec expects full-year pre-tax earnings of £190m and EPS of 28.1p (2009: £155m and 27.1p).
INCHCAPE (INCH) | ||||
|---|---|---|---|---|
| ORD PRICE*: | 325p | MARKET VALUE: | £1.50bn | |
| TOUCH: | 324-325p | 12-MONTH HIGH: | 367p | LOW: 232p |
| DIVIDEND YIELD: | Nil | PE RATIO: | 10 | |
| NET ASSET VALUE**: | 261p | NET CASH: | £84.9m | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Net div per share (p) |
|---|---|---|---|---|
| 2009 | 2.79 | 47 | 7.3 | nil |
| 2010 | 3.10 | 115 | 17.2 | nil |
| % change | +11 | +145 | +136 | - |
*Following a 10 for 1 share consolidation on 17 May 2010 **Including intangibles of £556m or 121p per share | ||||
