Inchcape cancels final dividend as it looks to conserve cash

(Sharecast News) - Inchcape updated the market on the ongoing impact of the Covid-19 coronavirus pandemic on Tuesday, confirming the cancellation of its previously-announced final dividend.
The FTSE 250 automotive distributor and retailer said it was continuing to closely monitor and assess the "rapidly evolving" situation in all of its markets, explaining that trading in a large number of them had been impacted by closures or significantly lower business activity.

It said its global diversification was supporting its performance, however, with 14 markets still operational - although at much reduced levels - including Australia, Ethiopia and Hong Kong.

Inchcape noted that while Singapore was operational through the first quarter, a one month lockdown began in the country on 7 April, with the board describing the situation as "clearly very dynamic".

The company said it had taken "swift action" to reduce discretionary costs and capital expenditure, benefiting from the flexibility of its distribution model, with the board and senior management taking a 20% reduction in fees and salary during the second quarter.

"Our strong relationships with original equipment manufacturers are enabling us to manage our inventory across markets and we are well-advanced in reducing stock orders and extending payment terms," the board said in its statement.

Inchcape said it had a "strong" balance sheet, having ended 2019 in a net cash position, aided by strategic retail disposals.

As of Tuesday, the firm said it had liquidity of ?600m, comprising available cash of ?140m and revolving credit facility headroom of ?460m.

"We have stress-tested the impact of various conservative scenarios - including a prolonged period of global shutdowns followed by materially reduced activity throughout the second half of 2020 - and are comfortable that we have sufficient financial resources to navigate an extended period of disruption."

Inchcape said that, given the high level of uncertainty around the duration and impact of the pandemic, it was exploring other debt options to further increase its liquidity and flexibility, including the UK government's Coronavirus Corporate Financing Facility.

The board confirmed that as it had decided to preserve cash, it was no longer recommending the payment of the previously-announced final dividend of 17.9p per ordinary share.

That meant the fourth resolution, referred to in the notice of the annual general meeting, would no longer be proposed.

Inchcape said on 20 March that it had put on hold any forward guidance until such time that the overall impact of the pandemic was clearer, which it reiterated on Tuesday.

"Looking beyond the current environment, we believe Inchcape remains well placed given our strong relationships with OEM partners, focus on distribution, exposure to markets with a structural growth opportunity and supported by a strong balance sheet," the board said.

Inchcape said it would publish its next trading update on 21 May.