Inchcape lifts 2021 profit guidance after strong Q3

(Sharecast News) - Car dealership Inchcape lifted its 2021 profit expectations on Thursday following a "strong" third-quarter performance.
In an update for the period from 1 July to 30 September, the company said group revenue grew 10% year-on-year on an organic basis to £1.9bn, but was down 2% on a reported basis. Compared to the third quarter of 2019, it was 2% lower on an organic basis.

In the distribution segment, revenue rose 20% year-on-year, but was 5% below the equivalent period in 2019. Inchcape said that while both the Europe and Americas & Africa regions generated revenue above 2019 levels, the Asia Pacific business was weighed down by the known impact of the Singapore vehicle licence cycle, and Australasia faced Covid-related restrictions.

In the retail unit, revenue fell 2% year-on-year, but was 5% higher than in 2019. Inchcape said this was a strong performance in the context of the supply constraints that continue to impact many of its OEM (original equipment manufacturer) partners.

The group now expects 2021 pre-tax profit of "at least £290m", driven by a stronger margin performance, up from previous guidance of "in excess of £260m".

Chief executive officer Duncan Tait said: "The group's Q3 results were stronger than expected. The better performance was broad based, with all regions supporting the results in the quarter. The pandemic continues to cause uncertainty across the globe, although with largely localised restrictions, it had a relatively small impact on the group in the period.

"While the ongoing supply shortages have had some impact on our topline performance, the group has, to date, benefited from higher vehicle gross margins."

Broker Peel Hunt lifted its December 2021 pre-tax profit estimate from £260m to £292m to give earnings per share of 54p from 48p.

It said that while there was no commentary on the FY22 outlook, gross margins should mitigate risk from vehicle supply.

Analyst Andrew Nussey, who rates the stock at 'buy' with a 1,000 price target, said the Capital Markets Day next month "could be a further catalyst".

"Shares trading on 16.1x December 22 continue to offer good value," he added.

At 1020 BST, the shares were up 3.2% at 831p.