Inchcape (INCH) has reported a fall in adjusted operating profits of more than a tenth in the first six months of the year. But the reversal had less to do with the parlous state of the UK auto retail sector than it did with specific challenges in the distribution business.
Distribution – which covers the whole automobile value chain between the factory and the retailer – drives around 90 per cent of overall profits. The division saw a constant currency trading profit decline of 11.8 per cent due to supply constraints in Australasia and Ethiopia and weakness in the Australian dollar against the yen. However, supply recovered towards the end of the period and the group has secured currency for two large orders in Ethiopia. Management is expecting performance to improve in the second half. House analyst Zeus Capital is forecasting adjusted EPS of 58.3p for 2019, down from 66.1p in 2018.
While only a small part of the bottom line, the group’s retail business still warrants a mention. Growth in Russia helped to deliver a 15 per cent increase in trading profits, even as the UK and Europe fell 19 per cent. The group has been cutting its retail portfolio in the UK and Australia, disposing of 10 sites. A further seven sales are expected in the UK before the year is out.
| INCHCAPE (INCH) | ||||
| ORD PRICE: | 586p | MARKET VALUE: | £2.4bn | |
| TOUCH: | 585-586.5p | 12-MONTH HIGH: | 826p | LOW: 482p |
| DIVIDEND YIELD: | 4.6% | PE RATIO: | 64 | |
| NET ASSET VALUE: | 328p* | NET DEBT: | 37% | |
| Half-year to 30 Jun 2019 | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 4.61 | 159 | 26.4 | 8.90 |
| 2019 | 4.73 | 154 | 27.8 | 8.90 |
| % change | +2 | -3 | +5 | - |
| Ex-div: | 01 Aug | |||
| Payment: | 04 Sep | |||
| *Includes intangible assets of £629m, or 154p a share | ||||
