Inchcape upbeat on solid first quarter of trading

Automotive distributor Inchcape reported a positive start to the year in a first-quarter update on Thursday, with its full-year results set to be in line with published market consensus.

The FTSE 250 company said group revenue for the three months ended 31 March totalled £2.7bn - up 50% on a reported basis.

It put the growth down to the benefit of mergers and acquisitions, including Derco, and organic growth of 13%, with growth across all regions.

Derco's revenue and profit contribution was in line with expectations, with the delivery of the integration plan said to be progressing well, including synergy targets.

The company said it had prioritised aligning inventory management practices with those employed across Inchcape.

It reiterated its operating margin expectation towards the top-end of a typical distribution business, at between 5% and 7% pre-synergies.

Inchcape said it was also expanding its distribution footprint in the Asia-Pacific region, having agreed to purchase Mercedes-Benz's distribution operations in Indonesia, which has an annualised revenue of around £200m, and CATS in the Philippines, with an annualised revenue of about £120m.

The completion of the purchase was expected in the second half of the year.

Additionally, Inchcape said it had been appointed as the distributor of Tata commercial vehicles in Thailand.

“Inchcape has made an excellent start to 2023 - our first quarter results show a continuation of the trends we experienced at the end of last year, with organic growth underpinned by the improvement in vehicle supply,” said group chief executive officer Duncan Tait.

“Growth in the distribution segment was further accelerated by the significant contribution from new businesses in the Americas, with Derco, Simpson Motors and Ditec all contributing positively.

“I am especially pleased with our progress in integrating Derco, and we remain firmly on track with our plans.”

Tait said that during the quarter, Inchcape continued to shift its portfolio towards distribution, expanding its footprint in the Asia-Pacific region.

“This included Mercedes-Benz's operations in Indonesia and an agreement to acquire CATS, the leading distributor of luxury vehicles in the Philippines - another new and exciting high growth market for the group.

“The combination of our broad market footprint, strong OEM relationships, our digital and data capabilities and our robust financial position continues to make Inchcape the natural consolidator in a highly fragmented industry.”

Duncan Tait described Inchcape as a business with “great” momentum and an “exciting” future.

“With a clear and proven strategy, we are well-positioned to capitalise on further opportunities for organic growth and market consolidation, and I am confident we will continue to deliver sustainable growth and long-term value for all our stakeholders.”

At 0810 BST, shares in Inchcape were up 1.77% at 778p.

Reporting by Josh White for Sharecast.com.