Car giant Inchcape seeks £230m in deeply discounted rights issue
Inchcape, which has more than 100 showrooms in the UK and sells marques including Audi, BMW and Mercedes-Benz, yesterday warned that trading conditions would remain "extremely challenging" this year as it unveiled a 19 per cent slump in full-year profits for 2008.
The company said proceeds from the rights issue would be used to cut debt – 408m at the end of last year – and delay the need to refinance existing bank facilities until the end of 2012.
Investors are being offered new shares at an 88 per cent discount to the company's share price on Wednesday night.
Results for 2008 show the group made a profit before tax and exceptional items of 190.7 million, down from 235.1m the previous year. Including one-off items, profits fell more than half to 108.2m.
Analysts remained cautious on Inchcape's prospects. In a research note, analysts at Citi said: "While a heavily discounted rights issue brings the net debt under control, the interest saving of 30 to 40m is likely to be offset by further downgrades as operationally geared emerging markets show further signs of weakening."
Inchcape, which also runs dealerships in markets as diverse as Russia and Hong Kong, has been forced to cut hundreds of jobs and introduce a pay freeze as sales of new cars go into reverse.
The company said it was braced for trading conditions to remain extremely challenging throughout 2009, with a "very weak performance" likely in the first half. Although full-year sales in 2008 rose 3.4 per cent to 6.3 billion, they fell sharply in the second half as the industry suffered an unprecedented downturn.
Few motor dealers have escaped the rout as rising unemployment and the squeeze on credit for big-ticket purchases keeps buyers away from the showrooms.
Yesterday, it was confirmed that the 2010 British International Motor Show has been cancelled as the car industry battens down the hatches.
Inchcape chief executive Andr Lacroix said: "Recent market conditions have been extremely challenging, affecting the entire car industry on a global basis. We have responded swiftly by reducing our cost base, right-sizing the business for the current environment and deleveraging the group."
On the rights issue, he said: "The level of discount that we're offering is in line with most of the rights issues done by very strong companies at the moment so there is nothing exceptional about that."
The group said it would not pay a final dividend for 2008 and did not expect to pay any dividends for the current year.