7.3.07

This article was written by Tom Braithwaite and first appeared in the Financial Times

"Inchcape, the international car dealer, will stop selling Ferraris and Fords in the UK as it prioritises scale and pushes into new countries.

The company announced a plan to dispose of 47 noncore UK dealerships as it published results for the year to December 31 that saw pre-tax profit rise 21 per cent to £213.9m and turnover increase by 8 per cent to £4.8bn. Franchises such as Land Rover, Bentley and Volvo will also go in the sale, leaving Inchcape to concentrate on a core selection that includes Toyota, Audi and BMW.


Proceeds will go towards funding expansion in emerging markets. Andre Lacroix, Chief Executive, said: "Our view is that we want to invest in growth and we are also pursuing a very progressive dividend policy.".

Inchcape is positioning itself as a consolidating force in mature markets - last year it bought European Motor Holdings, a UK dealership chain, for £263m - and a pioneer in emerging markets such as China and Russia.

The dual strategy has been employed to counteract sluggishness in mature markets.

Operating profit declined in Hong Kong from £28.8m to £24m as the car market shrank and from £62.1m to £58.6m in Singapore as Inchcape suffered fiercer competition from parallel importers.

Mal Patel, analyst at Merrill Lynch, said: "Russia and China remain encouraging outposts that in due course might well compensate handsomely for what look like unfavourable structural trends in Singapore and Hong Kong".

Shares in the company rose 23¾p to 531¼ yesterday. The results beat analysts' forecasts and Inchcape said it was confident about the coming year.

Earnings per share increased from 27p to 37.5p. The company is proposing a final dividend of l0p (6.3p), making a total of 15p (9.5p).

It has completed a £65m share buy-back programme and has no immediate plans to commit more cash to buybacks, preferring to invest in the business."

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