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Inchcape has posted significant rises in sales and profits across its global operations in the year ended 31 December 2013.
Group sales rose 7.7% to £6.5bn (2012: £6.1bn) with pre-tax profits up 7.4% to £266.1m (2012: £247.7m). Its operations in the UK and Europe delivered 44% of revenue and 27% of trading profit.
UK operations performed strongly, despite margins squeezed by over-supply, with retail sales up 4.1% to £2.18bn (2012: £2.09) and up 8.7% on a like for like basis, having disposed of its Ford operations in February.
The business, rated fourth in the Motor Trader Top 200, operates 111 retail sites across the South East, Midlands, North and North East of England and focuses on luxury and premium brands.
“New car sales drove an increase in revenue as we benefited from both market growth and an improvement in share performance. Used car revenues were in line with our expectations and our service and parts business started to benefit from the gradual recovery of the one to five year car parc,” said André Lacroix, group CEO.
Lacroix said UK performance was impacted by an over-supply of vehicles.
“Our continued cost discipline resulted in overhead reduction versus last year. This was offset by an unprecedented level of tactical activities in the market which resulted in an over-supply of vehicles and which impacted our gross margin on both new and used cars. In 2013 our UK Retail business delivered an industry leading trading margin of 2.5%.”
Mike Allen, the automotive analyst at Panmure Gordon described the UK numbers as “disappointing” within the context of the group’s overall performance, which was driven by pressures on margin due to oversupply.
“Within the mix, the key standout performances versus our expectations appear to be the UK, which was 8% below our forecast expectations. Management commented that this was driven by margin pressure in its new and used car operations during H2 2013,” he said.
Lacroix is confident the car market will grow in 2014 “albeit at a lower rate than 2013” and the recovery of the European markets should reduce the level of tactical activity in the UK market which he said should “gradually improve new and used vehicles margin performance”.
“The car parc of vehicles between one and five years is expected to accelerate its growth momentum based on the strength of growth in the new car market in the last five years. We are well positioned to leverage the growth of the new car and aftersales market as we stay focused on delivering superior customer service and launch the exciting pipeline of our brand partners’ new models.
“We expect to deliver a solid performance in the UK in 2014 as we expect a gradual recovery of vehicle margin and we plan to leverage the good growth momentum of the one to five year car parc.”