Just a year ago, Inchcape looked set for the breaker's yard. But an enormous injection of shareholder cash and £70m of cost-cutting has got the business back on the road.
Net debt was slashed from £408m at end-2008, thanks partly to April's £234m, nine-for-one rights issue, but also because of a massive cash inflow from the business itself. It generated £337m of cash from operations, reflecting the introduction of tighter working capital management after a focus on its stock and supply chain.
Of course, Inchcape did benefit from the scrappage scheme in the UK, where it was able to double trading profits. But it cautioned that UK sales could slip this year as the scheme ends. And the global automotive slump meant falling profits in every other region, with its emerging markets businesses hit particularly hard. While management said these markets would remain challenging in 2010, it is hopeful of prospects in China, now the world's largest car market, and expects strong fourth-quarter momentum in Hong Kong and Australia to carry into the new year.
Broker Investec expects underlying full-year pre-tax profits of £165m and EPS of 2.4p this year (from £155m and 2.7p in 2009).
INCHCAPE (INCH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 28p | MARKET VALUE: | £1.28bn | |
| TOUCH: | 27-28p | 12-MONTH HIGH: | 37p | LOW: 6p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 12 | |
| NET ASSET VALUE: | 23p* | NET CASH: | £0.8m | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p)** | Dividend per share (p)** |
|---|---|---|---|---|
| 2005 | 4.49 | 177 | 4.55 | 1.60 |
| 2006 | 4.84 | 214 | 6.32 | 2.53 |
| 2007 | 6.06 | 240 | 6.41 | 2.66 |
| 2008 | 6.26 | 108 | 1.89 | 0.92 |
| 2009 | 5.58 | 137 | 2.30 | nil |
| % change | -11 | +26 | +22 | - |
*Includes intangible assets of £546m or 12p a share **Adjusted for rights issue | ||||
