Investors impressed as car dealer's results move up a gear

Published on Wednesday 24 June 2009 22:42

CAR dealership Inchcape yesterday forecast a big improvement in quarterly profits, despite continued weak demand for new vehicles.

The group, which has more than 100 retail centres in the UK and sells marques including Audi, BMW and Mercedes-Benz, said aftersales business remained strong while it had also benefited from ongoing cost reductions.

In the second quarter of the year, Inchcape said profits were expected to be significantly ahead of the first quarter, albeit well below a year ago.

Like-for-like sales in constant currency terms were down 23.8 per cent in the five months to May 31.

Inchcape said: "Customer demand for new vehicles is still weak but our aftersales business, which represents approximately half of our gross profit, remains strong."

In the UK, Inchcape said it continued to outperform the industry with like-for-like sales down 21 per cent in a market that was down by 27.9 per cent. The group, which employs more than 15,000 people and operates in Singapore, Australia, Hong Kong, Greece, Belgium and Russia, has responded to the industry slump by cutting 2,000 jobs and introducing a salary freeze.

In May, it raised 234 million from shareholders in order to strengthen its balance sheet.

Shares jumped yesterday as investors welcomed the profits improvement and the bigger than expected drop in net debt to about 100m.

Investec Securities increased its profits forecasts as a result of the update.