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Inchcape faces distribution difficulties

Exceptionals boosted profits, but the group is facing challenges
Inchcape faces distribution difficulties

Inchcape (INCH) is unlike the other UK-listed auto retailers in that most of its money doesn’t come from auto retail. The group makes 91 per cent of its trading profits from distribution – the value chain of a car between the factory and the retailer – meaning it has suffered far less from the fall in new-car registrations in the UK. However, the group has problems of its own.

IC TIP: Hold at 563p

Statutory pre-tax profits were up by an eye-popping 256 per cent, thanks to the non-recurrence of massive impairments from 2018, as well as profits on disposal of retail sites from the UK to Australia, to the last of its outlets in China. However, strip out the exceptionals and constant currency profits fell 7.4 per cent. Management reported difficulties across a range of its markets, including Singapore, Hong Kong and Chile, although supply constraints in Australia and Ethiopia reportedly eased “materially” in the second half of the year.

This year is expected to remain tough, although management said it expected to see the group demonstrating sustainable profitable growth “when markets improve” – hardly an inspired insight. 

Bloomberg consensus forecasts give adjusted EPS of 52.4p in 2020, down from 60.9p this year.

INCHCAPE (INCH)   
ORD PRICE:563pMARKET VALUE:£2.25bn
TOUCH:562-563p12-MONTH HIGH:725pLOW: 536p
DIVIDEND YIELD:4.8%PE RATIO:7
NET ASSET VALUE:320p*NET DEBT:19%**
Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20156.8426339.820.9
20167.8426843.223.8
20178.9536964.326.8
2018 (restated)9.281137.826.8
20199.3840279.026.8
% change+1+256+913 
Ex-div:14 May   
Payment:19 Jun   
*Includes intangible assets of £578m, or 145p **Includes lease liabilities of £353m