Inchcape reports faster growth abroad than at home due to Brexit

Inchcape, one of Britain’s biggest global car dealerships, has reported a higher growth rate in its international businesses than in the UK due to uncertainty leading up to Brexit in the first half of the year.

According to the board the new vehicle market growth rate in the UK fell to 1% compared to 5.1% in the first quarter. Data from the Society of Motor Manufacturers & Traders showed car registrations in Britain fell in June.

Meanwhile in the firm’s global operations, growth is accelerating. Its Europe segment, which consists of Belgium, Luxembourg, Greece and Finland, saw a 4.4% increase in trading profit. Trading profit growth in Australia and New Zealand was 13%, South Asia at 55% and emerging markets at 20.4%. The exception was North Asia where trading profit decreased by 32.5% due to challenging trading conditions in Hong Kong and Macau where the new vehicle market declined by 8%.

The company believes performance will pick up at home as well. “We expect to deliver a resilient performance in the UK in 2016, albeit there is greater uncertainty on consumer demand following the EU referendum."

With majority of the firm’s profits coming from Asia Pacific and emerging markets, its overall operations were not affected much by Brexit. Revenue went up 11.2% to £3.8b and profit before tax rose by 7.8% to £165m. The firm attributes this growth to its “strong set of premium and luxury automotive distribution and retail businesses operating across five continents and five value drivers”.

The firm has also benefitted from the devaluation of the pound from having majority of its operations abroad. “With over three quarters of profits denominated in currencies other than Sterling, our reported actual currency performance will benefit if current exchange rates prevail” said the board. The group derived a gain of £5.1m from the translation of its overseas profits before tax into Sterling at the 2016 average exchange rate when compared with the average exchange rates in the first half last year.

The firm has further expanded its operations abroad by securing a distribution contract for Jaguar Land Rover in Thailand. Chief executive Stefan Bomhard said the deal is "the first new Distribution contract for Inchcape in a new market for many years, as we begin to deliver on our strategic objective of investing to accelerate growth".

The group also has plans to optimise its Jaguar Land Rover footprint in the UK through the acquisition and disposal of different sites. Further changes have occurred with the disposal of a site in Australia and liquidation of a joint venture in Greece. Consideration for the acquisitions was £4.6m and disposal proceeds were £2.0m. Operations have continued to deliver strong operational cash flow with net funds at £135.6m at 30 June 2016.

The firm's good performance from the first half has led to an extension of its share buyback programme by £100m. "Given the group's balance sheet strength and strong underlying cash generation, the Board has concluded that there is scope to return additional surplus cash to shareholders." The board has returned £300m through the scheme over the past three years.

Interim dividend of 7.0p was recommended, marking an increase of 2.9%. Shares fell 1.46% to 709p at 1159 BST on Thursday.