10th Mar 2015 12:54
LONDON (Alliance News) - Inchcape PLC was the toast of the FTSE 250 on Tuesday after the automotive retailer and distributor posted a rise in revenue and underlying pretax profit and hiked its dividend, even as its reported pretax profit dropped due to an exceptional charge taken in its Russian business.
Inchcape shares were up 8.4% to 803.50 pence on Tuesday early afternoon, the best performer in the mid-cap index.
Inchcape said its pretax profit for 2014 was GBP255.8 million, down from GBP266.1 million last year due to a GBP47.4 million goodwill impairment charge the company booked on its Russian operations. Stripping out exceptional costs, pretax profit rose to GBP303.2 million from GBP274.6 million.
Revenue rose to GBP6.70 billion from GBP6.52 billion a year earlier, boosted by a 3.5% rise in new car volumes over the year and a return to growth in the Singapore and Greece markets. Inchcape said its markets which have seen growth in new car volumes since the financial crisis are now seeing this recovery broaden into service and parts category, benefiting the wider business.
The company will pay a final dividend of 13.8 pence, up 18% on the 11.7 pence paid a year earlier. Its total dividend for the year will be 20.1 pence, up 16% on the 17.4 pence it paid in 2013.
"The group has a track record of delivering sustainable earnings growth with a high return on capital employed and we believe our distinctive strength across primarily small and medium size markets in both vehicle sales and aftersales will continue to drive consistent returns for our shareholders," said Inchcape Chief Executive André Lacroix.
"We have good visibility across our markets and categories and, notwithstanding an uncertain geopolitical environment in some of our markets, we expect to deliver a robust underlying constant currency performance in 2015," Lacroix added.
Inchcape said its Australasian business was the star performer in 2014, despite results from the division being held back by the strength of sterling against the Australian dollar. Underlying trading profit in the division increased on the back of a strong performance from its Subaru distribution business, which won market share and benefited from a favourable exposure to buying in Japanese yen.
But the Russian business proved a drag on reported results for the company. Underlying revenue, stripping out the currency translation hit resulting from the depreciation of the ruble against the pound, rose 6.6%, but Inchcape said that while it remains confident on the long-term prospects for the business, it is reducing its near-term growth expectations and has taken a GBP47.4 million non-cash impairment charge on the carrying value of goodwill in the country.
Inchcape's Distribution division saw sales rise 9.8% year-on-year to GBP2.6 million, boosted by its Australasian business. South Asia sales also surged, up 27% on the strength of the new car market, and North Asia sales rose 12% as the group won further market share in Hong Kong.
Emerging markets sales rose 20% in the year, while European sales increased 6.8%, driven by a recovery in the Greek market and market share gains in Belgium.
Retail sales rose 10% in the year to GBP4.1 billion, pushed up by double-digit growth in the UK and the first full year contribution from the Trivett prestige and luxury business in Australia, which Inchcape acquired in February 2013.
Sales in the UK market grew 12.7%, though its trading margin was dragged lower by a higher mix of new car sales coupled with continued pricing pressure in both the new and used car segments. Australasia sales grew 9.9%, boosted by the Trivett business, and trading profit increased 17% as its trading margin improved in the region on synergy benefits from the acquired company.
European like-for-like sales grew 21% in the year and the region returned to profitability, Inchcape said, but its emerging markets business was hit by geopolitical turmoil in Russia, which impacted consumer confidence.
By Sam Unsted; [email protected]; @SamUAtAlliance
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