Inchcape reiterates guidance after third-quarter growth

Automotive distributor Inchcape reported third-quarter revenues of £2.8bn in an update on Thursday, making for growth of 35%, with organic revenue growth at 10%.

The FTSE 250 company said its distribution segment stood out with 13% organic revenue growth, while the Asia-Pacific region continued to be a significant driver with widespread expansion across its markets.

In Europe, the firm reported a robust performance backed by the unwinding of the order bank, although new consumer demand remained subdued.

Inchcape meanwhile experienced growth in most markets in the Americas, as it gained market share and accelerated cost synergies, effectively offsetting weaker markets in Chile and Colombia.

In terms of strategic progress, Inchcape inked five new distribution contracts with Changan in the Philippines and East Africa, further bolstering its global presence.

The company also completed acquisitions in Indonesia, the Philippines, and New Zealand.

Inchcape said its digital and data capabilities were also pivotal in optimising its core business and advancing ‘vehicle lifecycle services’ initiatives.

The integration of Derco remained on track, with expectations of accelerated cost and cost-related annualised synergies of up to £20m in the 2023 financial year, aiming for at least £40m by the end of 2024.

Operating margins for 2023 were anticipated to be towards the top end of the 5% to 7% range, pre-synergies.

Additionally, Inchcape reported significant progress in enhancing Derco’s working capital position, reducing excess inventory by 50%.

Looking ahead, Inchcape reiterated its 2023 guidance, unchanged from its first-half results in late July, based on prevailing market conditions, accelerated cost synergies, and contributions from acquisitions.

“Inchcape produced another strong performance in the third quarter,” said group chief executive officer Duncan Tait.

“We delivered continued momentum across Asia-Pacific, supported by acquisitions, while our business in Europe and Africa performed well.

“In the Americas, we are gaining share in key markets and the integration of Derco remains on track.”

Tait said that thanks to the “highly cash-generative and capital-light characteristics” of the business, Inchcape would continue to be a key consolidator in a fragmented market.

“As a result of our market leadership positions, diversified business and digital and data capabilities to support our OEM partners, we remain confident about the medium to long term outlook for the group.”

Reporting by Josh White for Sharecast.com.